12. Your firm would like to evaluate a proposed new operating division. You have forecasted cash flows for this division for the next five years, and have estimated that the cost of capital is 12%. You would like to estimate a continuation value. You have made the following forecasts for the last year of your five-year forecasting horizon (in millions of dollars): \begin{tabular}{|l|r|} \hline Revenues & Eear \\ \hline Operating income & 1,200 \\ \hline Net income & 100 \\ \hline Free cash flows & 50 \\ \hline Book value of equity & 110 \\ \hline \end{tabular} a. You forecast that future free cash flows after year 5 will grow at 2% per year, forever. Estimate the continuation value in year 5 , using the growing perpetuity formula. b. You have identified several firms in the same industry as your operating division. The average P/E ratio for these firms is 30 . Estimate the continuation value assuming the P/E ratio for your division in year 5 will be the same as the average P/E ratio for the comparable firms today. c. The average market/book ratio for the comparable firms is 4.0 . Estimate the continuation value using the market/book ratio