To discuss: Planning horizon.
Introduction:
The two dimension of financial planning are as follows:
- Planning horizon and
- Aggregation
Answer to Problem 4.1CTF
M’s incorporation is in the process of preparing a financial plan for the firm for the next five years. This five year plan is referred as planning horizon.
Explanation of Solution
The span of time required to complete the desired plan is known as planning horizon; it is the first dimension of financial planning. It is also a part of financial decisions. As mentioned above, the period of five year is known as planning horizon.
The planning horizon is the period of length taken by the company on a particular plan which can either be a short term period or long term period. It is ultimately based on uncertainty. The higher the uncertainty, shorter would be the planning horizon.
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Chapter 4 Solutions
Fundamentals of Corporate Finance
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