1. How long will it take a firm to reach a $2 million valuation if it has $93,400 net operating cash flow/year pre-tax and a weighted average cost of capital (WACC) of 8%? Assume it can earn 3% above its WACC and it retains 63% of its earnings. The corporate tax rate is 15%.
2. When the firm in part (a) reaches after tax net operating cash flow of $107,589/year, what percent of its earnings must it retain to reach a $2 million valuation in 5 years if it can now earn 12% above its WACC?

Show your calculations for both parts