What is the purpose of calculating the non-constant growth rate until horizon date T?

Calculating the non-constant growth rate until the horizon date T is primarily used to project the company's value at the end of the forecast period, commonly referred to as the horizon value or terminal value. This calculation plays a crucial role in discounted cash flow analysis, which seeks to determine the present value of a company's future cash flows.

In a typical scenario, the non-constant growth rate is applied during the initial years of the forecast when a company may experience varying or unpredictable growth due to various factors like product launches, market conditions, or economic cycles. By modeling these initial growth rates accurately, analysts can forecast future cash flows realistically. Once this volatile period is over, a stable growth rate can often be assumed for the long-term after the horizon date.

By estimating the terminal value at this point, it reflects the value of the company’s anticipated cash flows beyond the forecast horizon under a stable growth assumption. This terminal value is a significant part of the overall valuation and is vital for investors as it represents the bulk of the company’s worth in many cases.

The other options do not align with the purpose of calculating non-constant growth rates. Determining fixed costs, estimating dividends, and assessing immediate cash flow needs do not specifically relate to how non-constant