Question: In the last problem, assume the cash flow from the Downhill acquisition grows at 10% from its initial value for one year and then grows

In the last problem, assume the cash flow from the Downhill acquisition grows at 10% from its initial value for one year and then grows at 5% indefinitely (starting in the third year). Calculate the value of the firm and the implied stock price under these conditions. Use a terminal value at the beginning of the period of 5% growth. What price premium is implied, in dollars and as a percentage, if Downhill’s stock is currently selling at $62? Comment on the range of values in the results of this and the last problem.

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