Your earnings will be as follows: Therefore, the PV is $884 million fromcash flows that you computed
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Your earnings will be as follows:
Therefore, the PV is $884 million fromcash flows that you computed explicitly, plus $4,540 million fromthe cash flows that is the terminal value stand-in for all cash flows from year 8 to infinity. This terminal value was computed as $8.452 billion in year 8, using the growing perpetuity formula. Together, the firm’s present value is therefore around $5.42 billion. Note: You could also calculate a terminal value in year 6 (for years 7 and beyond), and reach the same answer.
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