1. Terminal Value Questions

A. Firm Free Cash Flow for XZ Enterprise is expected to be $8.75 million at the end of 2022 (end of planning period). The expected annual growth rate after the planning period is 3% per year indefinitely. What is the Method #1 terminal value for the project. Assume the WACC for the firm is 9.6%.

2. Refer to 1a. Assume today is December 31, 2018. Calculate the PV of XZ Enterprise terminal value.

c. Suppose you are discussing questions 1a and 1b with a colleague who has no training in finance. Explain two terms Method #1 terminal value and PV of terminal value. Touch on their significance/importance to the estimate of enterprise value.