You have been asked to review a valuation of Pritchett Chemicals AB$,$ a publicly traded chemical firm, done by a valuation appraisal service. The service used the

following estimates of cash flows and discount rates ears in making their valuation:

EBIT$(1-$t$)$ is $10\%$ of revenues, and Net Cap Ex and revenues are expected to grow with $20\%$ year $2-3.$

HINT: The analyst has assumed that cash flows will grow at $3\%$ in perpetuity after year $3$ and used his estimate of year $4$ cash flow to compute the terminal value.

Estimate the value of the firm, using the analyst's estimates of cash flows and costs of capital. What is then the return on capital in perpetuity assumed by the

analysts?