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8.6 Using economic profit in years 1 to 5 calculated in Question 5, an estimated continuing value at the end of year 5, and the

8.6 Using economic profit in years 1 to 5 calculated in Question 5, an estimated continuing value at the end of year 5, and the weighted average cost of capital computed in Question 2, value BrandCo using the economicprofitbased key value driver model. Assume a long-term growth rate in cash flows of 5 percent and RONIC of 15 percent. Should discounted economic profit be greater than, equal to, or less than discounted free cash flow. Hint: Prior year invested capital must be used to determine ROIC and capital charge.

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