Q5-1, DCF valuation Suppose your firm is 100% financed by equity. You firm's free cash flow per year is as follows: Year 1 = 120,000 Year 2 = 140,000 Year 3 = 150,000 Year 4 = 160,000 Year 5 = 170,000 Year 6 = 180,000 The cost of capital is 30% for the first 1-5 years, and will be reduced to 20% after 5th year. 25-1-1. What would be the terminal value at year 5, if there is 2% growth expected beyond 5th year. VCF6 = ?? g6 = ?? r6 = ?? Terminal value at year 5 = P5 = VCF6/(r6-86) = ?? Q5-1-2. What is present value of the firm today? r1 = ?? PO = VCF1 /(1+r1)^1 + ... + (VCF5 + P5) / (1+r1)^5 = ?? 05-1 5 0 1 2 3 6 002 0.3 Year Growth rate Discount rate Cash flow Terminal value Total cash flow PV of future cash flow 02 170,000.00 180000 120,000.00 140,000.00 160,000.00 150,000.00 Gordon growth model 72 72 22 72 22