7–16. Ergo Unlimited’s current year’s free cash flow to equity is $10 million. It is projected to grow at 20 percent per year for the next five years. It is expected to grow at a more modest 5 percent beyond the fifth year. The firm estimates that its cost of equity is 12 percent during the next 5 years then will drop to 10 percent beyond the fifth year, as the business matures. Estimate the firm’s current market value.

Answer: $358.3 million.