Consider the table given below to answer the following question.

Year	1	2	3	4	5	6	7	8	9	10
Asset value	10.00	11.20	12.54	14.05	15.31	16.69	18.19	19.29	20.44	21.67
Earnings	1.20	1.34	1.51	1.69	1.84	2.00	2.18	2.31	2.45	2.60
Net investment	1.20	1.34	1.51	1.26	1.38	1.50	1.09	1.16	1.23	1.30
Free cash flow	0.00	0.00	0.00	0.42	0.46	0.50	1.09	1.16	1.23	1.30
Return on equity	0.12	0.12	0.12	0.12	0.12	0.12	0.12	0.12	0.12	0.12
Asset growth rate	0.12	0.12	0.12	0.09	0.09	0.09	0.06	0.06	0.06	0.06
Earnings growth rate		0.12	0.12	0.12	0.09	0.09	0.09	0.06	0.06	0.06

Assuming that competition drives down profitability (on existing assets as well as new investment) to 11.5% in year 6, 11% in year 7, 10.5% in year 8, and 8% in year 9 and all later years. What is the value of the concatenator business? Assume 10% cost of capital.

Note: Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.

Answer rating: 100% (QA)

SOLUTION To calculate the value of the concatenator business we need to determine the present value of the free cash flows generated by the business a... View the full answer