Question

When using discounted cash flow analysis for valuation, the appraiser must estimate the sale price at the end of the expected holding period. This price is referred to as the property's

Answer 1

Complete Question:

When using discounted cash flow analysis for valuation, the appraiser must estimate the sale price at the end of the expected holding period. This price (assuming selling expenses have yet to be accounted for) is referred to as the property's:

Group of answer choices

A. net sale proceeds

B. selling expenses

C. terminal value

D. current market value

Answer:

C. Terminal value.

Explanation:

When using discounted cash flow analysis for valuation, the appraiser must estimate the sale price at the end of the expected holding period. This price (assuming selling expenses have yet to be accounted for) is referred to as the property's terminal value.

Terminal value can be defined as the discounted value of all cash flows for a property after its forecast period or investment time in discounted cash flow analysis.

This ultimately implies that, the property's terminal value is primarily used for the estimation or determination of its value based on future cash inflow.