Firm weighted average cost of capital during the high growth

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Reference no: EM131851072

Estimate the value of a firm (P0) whose cash flow is projected to grow at a compound annual average rate of 35% for the next 5-years and then assume a more normal 5% annual growth rate.

The current year’s cash flow is $4 million.

The firm’s weighted average cost of capital during the high growth period is 18% and then drops to the industry average rate of 12% beyond the fifth year.

Reference no: EM131851072

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