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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Pro Forma Ended Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year's Rate 10% 10% 10% 9% 9% 9% 8% 8% Discount Rate (compounded) 10% 21% 33.1% 45.1% 58.1% 72.4% 86.2% 101.1% Growth Rate 20% 20% 20% 10% 10% 10% 5% 5% Earnings (million $) ($100) $120.00 $144.00 $172.80 Terminal Value (million $) $190.08 $209.09 $230.00 $241.50 $253.57/(8% -5%) $8,452.33 $253.57 Present Value (million $) Present Value (million $) $109.09 $119.01 $129.83 $131.02 $132.22 $133.43 $129.73 $4,540.41