In the recent year, Company X generated $100 million in EBIT(1-t). For the next 3 years, a 10% growth rate and 16% return on capital are expected. The cost of capital will decrease from 9% in year 1 to 8% in year 2 to 7% in year 3.

Please calculate the following:

The EBIT (1-t) for the next 3 years
Reinvestment for the next 3 years
FCFF for the next 3 years
Terminal value
Value of the operating assets (=PV of intermediate FCFF + PV terminal value)

Answer rating: 100% (QA)

To solve this problem we need to use the formula for free cash flow to the firm FCFF which is FCFF EBIT1 t Capital expenditures Depreciation1 t Change ... View the full answer