Terminal Growth Rate
I would appreciate if anyone could good provide a good explanation for the below queries:
1. The higher the terminal growth rate, the higher the value. However, it changes when the growth rate gets higher than the cost of capital as the terminal value becomes negative. How does it being greater than the cost of capital, change the whole scenario?
2. The only constraint on growth rate is that it be less than the GDP growth rate otherwise it will become greater than the economy. Is there any better explanation why it can't be greater than the GDP growth rate? How do they both connect?
Analyst2021, bummer your thread hasn't had a response yet. Sometimes bots are smarter than humans anyways:
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