Q1. ABC’s the most recent free cash flow (FCF0) is $200 mil…
Q1. ABC’s the most recent free cash flow (FCF0) is $200 million. The free cash flow is expected to grow at a rate of 40 percent in next year and 10 percent in the second year. After two years, it is expected to grow forever at a constant rate of 6 percent. The cost of common stock (rs) is 10% and the weighted average cost of capital (WACC) is 8%. What is terminal value (horizon value, HV2) at the end of year 2?