Consider the calculation of the continuation value. Suppose Firm C has a WACC of 6%. Firm C's investment banker prepares a DCF valuation of Firm C using the WACC approach. In her DCF valuation, Firm C's investment banker suggests to use a Firm-Valueto-Noplat multiple of 28 to calculate the continuation value after the explicit forecast period. That is, she suggests that instead of using a formula, one should just multiply Noplat in the year after the explicit forecast period (that is, Noplat in year T+1) by 28 to arrive at the continuation value. Assume that year T+1 is 2029.

Now suppose that Firm C is projected to have $140 million in Noplat and interest expense of $20 million in 2029 (year T+1). It is forecast to have $520 million in debt in 2028 and 2029. Firm C has 90 million shares outstanding and this number will remain constant. The marginal corporate tax rate is 15%. The investment banker agrees that a reasonable range of PE (price-earnings) ratios for Firm C in 2028 and 2029 is between 20 and 25. Do you think that under these assumptions the Firm-Value-to-Noplat multiple of 28 is reasonable for the continuation value? Why or why not? Explain your reasoning carefully and show your calculations.