Answer number 6 and 7

set capital expenditures equal to depreciatl o. Crabbe Steel owns a number of steel plants in Pennsylvania. The firm report you after-tax operating income of $40 million in the most recent year on capital . vested of $400 million. The firm expects operating income to grow 7% a ver for the next three years, and 3% thereafter. a. If the firm's cost of capital is 10% and you expect the firm's current return capital to continue in perpetuity, estimate the value at the end of the think year. b. If you expect operating income to stay fixed after year 3 (what you earn in value. year 3 is what you will earn every year thereafter), estimate the terminal c. If you expect operating income to drop 5% a year in perpetuity after year 3 estimate the terminal value. How would your answers to the preceding problem change if you were told that the cost of capital for the firm is 8%