You are an analyst at Dewey, Cheatum, and Howe. The director of research presents the following free cash flow data for ABC Corp (in millions of $).

Year Cash Flow

2010 1250

2011 1300

2012 1600

2013 1700

2014 1800

He asks you to please calculate the:

Geometric Total Return

Geometric Annualized Return

Then, the director asks you to make a 10 year forecast based upon the geometric annualized return.

Next, he asks you to value the companys shares based on your 10 year forecast and the following assumptions.

Current weighted average cost of capital: 12.7%.

Terminal Growth Rate: 3%

Terminal Cost of Capital: 14%

Shares outstanding: 550 million

Shares of ABC are trading at $35 per share. Do you recommend a buy or a sell rating?