Eden Ltds current and forecasted Free Cash Flows to the Firm (FCFF) and the forecast horizon are as follows:

($ millions)	Current	Forecast Horizon				Terminal Period
	2021	2022	2023	2024	2025	2026
FCFF	2,500	2,661	3,220	3,350	3,483	3,768

Valuation assumptions and other information for Eden Ltd are as follows:

Forecast horizon sales growth rate	4%
Terminal growth rate	1.5%
WACC	5.8%

Required:

1. Using the Discounted Cash Flows (DCF) model, compute the present value of the Terminal value of FCFF at the end of the current year. Show your workings.

(2 marks)

2. The terminal period assumes Eden Ltd will achieve a steady state where its FCFFs will grow at a constant rate starting at the end of the forecast horizon. Discuss any issue you may observe in Eden Ltds forecasted FCFFs. What change do you have to make to satisfy the terminal period assumption? (Maximum words: 100)

(2 marks)

(Total for Question 4: 4 marks)