1. (3 points) You are trying to estimate the long run growth rate of a firm called GrowInc. GrowInc is an IT firm that will always operate exclusively in the IT industry. You know that GDP will grow at 5% in perpetuity, and that the IT industrys unlevered free cash flows (FCFs) will grow at 3% in perpetuity. Inflation will be 0% throughout. GrowIncs FCFs have been growing at 15% for the last 10 years. You are estimating GrowIncs FCFs for the next 10 years and expect that over the next 10-years the growth rate of FCFs will be on average 10%. You believe that after those 10 years GrowInc will enter a constant growth period with a perpetual growth rate of g. You are wondering which growth rate g you should use for your valuation (for the terminal value calculation). Given the data provided, you think that the following statement is most accurate: a. g=15% is the best estimate b. g=10% is the best estimate c. You should pick g less than 10% d. You should pick g less than or equal to 5% e. You should pick g less than or equal to 3%

For each of the following 4 multiple choice questions please mark exactly one answer: 1. (3 points) You are trying to estimate the long run growth rate of a firm called GrowInc. GrowInc is an IT firm that will always operate exclusively in the IT industry. You know that GDP will grow at 5% in perpetuity, and that the IT industry's unlevered free cash flows (FCFs) will grow at 3% in perpetuity. Inflation will be 0% throughout. GrowInc's FCFs have been growing at 15% for the last 10 years. You are estimating GrowInc's FCFs for the next 10 years and expect that over the next 10 -years the growth rate of FCFs will be on average 10%. You believe that after those 10 years GrowInc will enter a constant growth period with a perpetual growth rate of g. You are wondering which growth rate g you should use for your valuation (for the terminal value calculation). Given the data provided, you think that the following statement is most accurate: a. g=15% is the best estimate b. g=10% is the best estimate c. You should pick g less than 10% d. You should pick g less than or equal to 5% e. You should pick g less than or equal to 3%