Example $1/2$

A firm is getting less risky over time: its discount rate

is $20\%$ for the first four years and then $10\%$ forever

thereafter

Its cash flows are expected to be $$1B,$$$1\mathrm{.}1B,$$$1\mathrm{.}3B,$

and $$1\mathrm{.}7B$ at the end of each of the next four years

Thereafter, they are expected to grow at $2\%$ forever

What is such a firm worth?

What if$,$ instead, after four years, the firm is expected

to trade at its historic multiple of $10$ times forward

earnings?