An analyst is evaluating Ari Inc. and shared the following projected net cash flows for the next 10 years.

Y1 1,000,000

Y2 1,000,000

Y3 1,150,000

Y4 1,200,000

Y5 1,200,000

Y6 1,300,000

Y7 1,500,000

Y8 1,700,000

Y9 2,000,000

Y10 2,200,000

Ari expects to continue to grow infinitely using the CAGR of the 10-year forecast period. 

Required

return relevant to Ari Inc. is at 12.1%.

What is the terminal value to be incorporated in the net cash flow to the firm computation?

Answer rating: 100% (QA)

To calculate the terminal value we need to use the perpetuity growth model which assumes that t... View the full answer