Brooks Enterprises has never paid a dividend. Free cash flow is projected to be $80,000 and

$100,000 for the next 2 years, respectively, and after the second year it is expected to grow at a constant rate of 8 percent. The company’s weighted average cost of capital is WACC  12%.

a. What is the terminal, or horizon, value of operations? (Hint: Find the value of all free cash flows beyond Year 2 discounted back to Year 2.)

b. Calculate the value of Brooks’ operations.