Corporation has projected its cash flows ( i. e., firm FCFs) for the indefinite future under the following assumptions: ( 1) Last year the firm€™s FCF was $ 1 million, and the firm expects this to grow at a rate of 20% for the next eight years; ( 2) beginning year 9, the firm anticipates that its FCF will grow at a rate of 4% indefinitely; and ( 3) the firm estimates its cost of capital to be 12%. Based on these assumptions, the firm€™s projected FCF over the next 20 years is the following:

a. Based on the information given and a terminal-value estimate for the firm of $ 89.4939 million for year 20, what is your estimate of the firm€™s enterprise value today (in 2015)?
b. If a three-year planning period is used to value Prestonwood, what is the value of the planning period cash flows and the present value of the terminal value at the end of year 3?
c. Answer Problem 9-12(b) for planning periods of 10 and 20 years. How does the relative importance of the terminal value change as you lengthen the planning period?

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Years Cash Flows (Millions) $1.2000 14400 1.7280 2.0736 2.4883 841 288ア 83 99 71 952 3444455555 67890123456789