. Dreamscape is a highly cash generative business so we view DCF valuation is appropriate. Key Assumptions used in our DCF valuation: o Terminal value calculated using the Gordon Growth model with a WACC of 13.8% (Ke 15%, 2.3x, ERP 5.5%, rt 2.3%) and a terminal growth rate of 3.0%. Figure 15: CGAU DCF Valuation methodology DCF Analysis - Firm Value Cash/Adj. EBITDA Less cash tax Less increase in Working Capital Less Capex Free Cashflow to Firm Discount factor PV of Free Cashflow Total PV of Explicit Free Cashflow Terminal Value PV of Terminal Value Firm Valuation Net Debt (post IPO) Equity Valuation EFPOWA Valuation Cost of Equity Valuation (1yr forward) Risk Free Rate Beta Equity RP Cost of Equity 2.3% 2.3 5.5% 15.0% FY17 11.0 -0.8 1.6 -1.4 10.4 0.91 9.4 FY18 12.2 -2.8 0.0 -1.0 8.4 0.80 8 10 6.7 FY19 13.6 -3.1 0.0 -1.0 9.5 0.70 6.6 FY20 14.0 -3.3 0.1 -1.0 9.9 0.62 25 6.1 Cost of Debt Gearing Ratio WACC Terminal Growth FY21 14.6 -3.4 0.1 -1.0 10.2 0.54 5.5 34.4 97.7 52.8 87.2 -17.5 104.7 344.0 0.30 15% 0.35 5.0% 10% 13.81% 3.0% Sensitivity (EV) Select one: 0.3 2.0% 2.5% 3.0% 3.5% 4.0% Which of the below statements is NOT correct? The: Discount rate (WACC, Ke:15%, Kd:5%) Terminal Growth rate (%) 9.8% 0.47 0.49 0.52 0.54 0.58 11.8% 13.8% 15.8% 0.39 0.33 0.29 0.40 0.34 0.30 0.41 0.35 0.31 0.43 0.36 0.31 0.45 0.37 0.32 17.8% 0.27 0.27 0.27 0.28 0.28 O a. Capital expenditure is forecast to be positive over the next 5 years, meaning that more non-current assets will be purchased than sold. O b. 'Free cash flow to firm' is discounted by the 15% pa cost of equity. O C. $34.3m 'Total PV of Explicit Free Cashflow' is the sum of the 'Pv of free cashflow' over the 5 year horizon, from FY2017 to 2021 inclusive. O d. $97.7m terminal value, if based on the perpetuity formula, must assume a $10.56137m free cash flow in FY2022, corresponding to a 3.54% growth rate between FY2021 and 2022. O e. $17.5m Net debt is negative because the firm's cash is greater than its interest bearing debt.