Typically, cash flows are forecast over a 5-10 year period and a present value is determined picking the appropriate capitalization rate.
Then the value of the firm at the end of the forecast period is added to the value of the cash flows during the forecast period.
Should the same cap rate be used for the forecast period and post-forecast period?
Or should the post-forecast value use a lower cap rate since the firm would be a well-established company by then?