Question ONE:

Assume CKL plc trailing twelve month $($ttm$)$ free cash flow $($FCF$),$ equal to that period's

operating cash flow minus capital expenditures and is determined as K$20$ Million. Suppose

that you estimate that CKL plc $\text{'}$s cash flow will grow by $20\%$ in the first two years, then $5\%$

in the following three. After a few years, you may apply a long$-$term cash flow growth rate,

representing an assumption of annual growth from that point on$.$ This value should probably

not exceed the long$-$term growth prospects of the overall economy; we will say that in this

case, Company CKL plc$\text{'}$s is $5\%.$ Your calculated Weighted Average Cost of Capital

$($WACC$)$ being $10\%.$

Required:

i$.$ Calculate the terminal value, or long$-$term valuation the company's growth using

the Gordon Growth Model

ii$.$ What are the limitations of using the Gordon Growth model in stock valuation?.