Question

Are there limits as to how high or low the terminal growth rate can be?

Answer 1

Yes. The terminal growth rate cannot be more than the discount rate / required return.

This is because the terminal value = terminal year cash flow * (1 + terminal growth rate) / (required return - terminal growth rate).

If the terminal growth rate is more than the required return, the terminal value is indeterminable.

Hence, the terminal growth rate cannot be more than the required return because the terminal value cannot be calculated in such a case. This is a limitation of the model.