Projections for Dragon Inc are shown below.Assume a WACC of 7.0%, a Cost of Equity of 11.5%, a risk-free rate of 2.5% and average inflation of 2.1%.Calculate the Terminal Value for Dragon Inc. in year 5.What perpetuity growth rate did you use? Explain your choice. What EBITDA multiple (Exit Multiple) is implied by your terminal value?

Year

Actual

1

2

3

4

5

CAGR

NOPLAT

$7,200

$7,402

$7,609

$7,822

$8,041

$8,266

2.8%

+ Depreciation

1,605

1,642

1,680

1,718

1,758

1,798

2.3%

- Capital expenditures

3,980

4,060

4,141

4,224

4,308

4,394

2.0%

- Increase in net WC

1,990

2,030

2,070

2,112

2,154

2,200

2.0%

Free Cash Flow

2,835

2,954

3,077

3,205

3,337

3,328

3.3%

EBITDA

9,200

9,456

9,600

10,299

10,823

11,000

3.6%

Show your work.Be sure to answer all four parts of this question.

a)Calculate the terminal value

b)What perpetuity growth rate did you use?Explain your choice.

c)What EBITDA multiple (Exit Multiple)is implied by your terminal value?

d)What is the Present Value of your terminal value?