Question

The direct income capitalization model employs …………. time horizon: ________

Answer 1

The direct income capitalization model employs an infinite time horizon.

What is time horizon?

• A time horizon, sometimes referred to as a planning horizon, is a set point in the future where specific activities will be assessed or taken to have concluded.
• Assigning such a defined horizon time is important in an accounting, financial, or risk management regime so that alternatives can be assessed for performance over the same time frame.

In the real world, a time horizon is physically impossible. Even though short term horizons like end of day, end of week, and end of month matter in accounting, these horizons are typically used for simple mark to market processes and summing up.

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