1.You have been asked to review the terminal value calculation in a valuation done by another analyst.The analyst has the following estimates for net income and FCFE for the next 3 years:

1 2 3

Net income 220 286 371,8

FCFE 88 114,4 148,72

To estimate the terminal value, the analyst has taken the FCFE in year 3 and grown it by 12% (the stable growth rate) and used a cost of equity of 18%, without considering the changing reinvestment needs. If the firm's return on equity will remain unchanged at current levels in perpetuity and the analyst's estimates of the FCFE for the high growth period are correct, estimate the correct terminal value of equity, using the perpetual growth rate of 12% and the cost of equity of 18%.