Using the following cash flow forecasts (in $ millions) for the years 2014, 2015, and 2016 for Dell Computer, developed at the end of fiscal year 2013, value a Dell share using a weighted average cost of capital of 12 percent.

2014F 2015F 2016F

Cash flow from operations: 3,845 4,029 3,613

The following information from Dell's balance sheet at the end of fiscal year 2013 will be needed:

Long-term debt $ 512 million

Common shares outstanding 2,543 million

A. Your valuation will be approximate because you have only three years of cash flow forecasts. Value the firm under the following expectations:

1. Free cash flow will continue as a perpetuity after 2016.

2. Free cash flow will grow at a 3 percent rate after 2016.

B. Dell traded at $40 per share at the end of its 2013 fiscal year. Given the forecasts of free cash flow for 2014-2016, what growth rate in free cash flow after 2016 is the market implicitly forecasting with a $40 price?