What do you think your firm is worth today

Reference no: EM131234009

Here is an example of the most common use of the growing perpetuity model (called a pro forma). Your firm just finished the year, in which it had cash earnings of $100 million. You forecast your firm to have a quick growth phase for 3 years, in which it grows at a rate of 20% per annum. Your firm's growth then slows down to 10% per annum for the next 3 years.

Finally, beginning in year 7, you expect it to settle into its long-term growth rate of 5% per annum. You also expect your cost of capital to be 10% over the first 3 years, then 9% over the next 3 years, and 8% thereafter. What do you think your firm is worth today?

Reference no: EM131234009

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