In the valuation exercise of section 5.4, the terminal value is calculated using a Gordon dividend model
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In the valuation exercise of section 5.4, the terminal value is calculated using a Gordon dividend model on the cash flows. Replace this terminal value by the year 5 book value of debt + equity. This means that you are essentially assuming that the book value correctly predicts the market value.
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The terminal value of a company is typically calculated using a Gordon Dividend Model which is based ...View the full answer
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