company being valued is in industry undergoing change; in 5 - 10 years business model in industry will be totally different, company unlikely to adapt. correct to: a) value flows for next 5 years with no growth, + b) value flows for following 5 years with annual growth (-10%), c) assign no terminal value? thanks

Question

company being valued is in industry undergoing change; in 5 - 10 years business model in industry will be totally different, company unlikely to adapt.     correct to: a) value flows for next 5 years with no growth, + b) value flows for following 5 years with annual growth (-10%), c) assign no terminal value?     thanks

anonymous · Answer

If you feel the company will not adapt, you should estimate cash flows from years 6-10 and then either assume that the firm liquidates or assume that the firm will shrink over time (a negative terminal growth rate)

anonymous · Answer

thanks