Exercise: This is a common situation in the real world. Assume that you are an analyst covering a "recurring

revenue" type firm. Recurring revenue firms typically earn revenues from customers over multiple periods. For

instance, cable companies pay to acquire new customers, and the customers pay for services over a recurring

time period. You will notice that this format is cost$-$driven, meaning that certain costs drive revenue! As an

analyst, you want to know a$)$ the financing needs for the firm, and b$)$ how much the firm is worth. ${?}^{**}$ Note that we

would typically build this model on a monthly basis, but this exercise gets to the concept without you using Excel.

As a "star analyst," you have used your skills to observe the financial metrics of the firm's competitors, industry

trends and macroeconomic trends. Also, you have listened to and critiqued the firm's latest quarterly conference

call. You incorporated all of this information to generate the following assumptions: