Vodacomp is a firm in significant financial trouble. The firm reported a negative EBITDA of -$ 80 million last year on revenues of $ 800 million. The firm has a net operating loss carry forward of $ 100 million currently and the marginal tax rate is 21%.

You expect revenues to grow 25% a year for the next 3 years and the EBITDA as a percent of revenues to be -10% in year 1, 5% in year 2 and 30% after that. The firm has substantially over invested in plant and equipment in the last few years and will reduce its capital expenditures to $ 60 million a year for the next 3 years. Depreciation will remain at $ 90 million a year for the next 3 years and increase by 4% thereafter. Non-cash working capital is expected to be 6% of revenues for the next 3 years. The firm will grow 4% a year forever, maintain a return on Lapital of 10% and a stable reinvestment rate The cost of capital will be 15% for the next 3 years and 10% thereafter.

The free cash flows to the firm for the next 3 years are:

FCFF(t=1)=

FCFF(t=2):

FCFF((t=3)

The Terminal Value at the end of year 3 based on a stable reinvestment rate is TV (t=3)

The value of the firm is EV(t=0)

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