A colleague suggests that a 6 percent growth rate is too low for revenue, profit, and cash flow growth beyond year 5. He suggests raising growth to 12 percent in the continuing value. If NOPLAT equals $26.6 million, return on new capital equals 15 percent, and the cost of capital equals 10 percent, what is the continuing value as of year 5? Is there an alternative model that is more appropriate?
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