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You have been given the free cash flows for the next three years for Postum Inc., a firm that is expected to have three years
You have been given the free cash flows for the next three years for Postum Inc., a firm that is expected to have three years of high growth:
Base Year | Year 1 | Year 2 | Year 3 | |
Expected Growth | 0.06 | 0.06 | 0.06 | |
EBIT (1-t) | 106.19 | 113.93 | 113.34 | 126.15 |
FCFF | 65.98 | 63.93 | 67.46 | 74.56 |
Assuming that the companys return on capital will stay unchanged forever and that the cost of capital is 0.1, estimate the terminal value for the firm, i.e., the value at the end of year 3, if the growth rate beyond year 3 is 0.04 in perpetuity.
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