Exhibit 2 presents free cash flow and economic profit forecasts for CrossfitCo, a $250 million company that produces equipment for cross-fit gyms. CrossfitCo is expected to grow revenues, operating profits, and free cash flow at 7 percent per year indefinitely. The company earns a return on new capital of 16 percent. The company's cost of capital is 10 percent. Using the key value driver formula, what is the continuing value as of Year 5? Using discounted cash flow, what is the value of operations for CrossfitCo? What percentage of CrossfitCo's total value is attributable to the continuing value? EXHIBIT2 CrossfitCo: Free Cash Flow and Economic Profit Forecasts $ million TodayYear1 Year2 Year3 Year4 Year5 value 375.2 (225.0) (240.8 (257.6) 275.6) (294.9) (315.6) (337.7) 37.5 2500 2675 2862 3063 327.7 350.6 Operating costs Operating profit 250 268 286 306 32 361 Operating taxes NOPLAT (6.3) 6.7) (72 7.7) (8.2) 8.8) 215 246 263 (9.4) 188 20.1 Net investment Free cash flow (8.0) 8.6) 9.2 9.8) 10.5) 158 120 129 13.8 14.7 Economic profit NOPLAT 201 215 23.0 24.6 263 28.1 Invested capital,-, Cost of capital (percent) Capital charge 179.9 0.10 18.0 1338 418 504 159.5 169.4 0.10 0.10 0.10 0.10 0.10 16.9 134 142 15.0 16.0 Economic profit 6.7 73 79 86 94 10.1