An Analyst is evaluating Quickie Inc. and shared the following projected net cash flows for the next 10 years. Year 11 000 000Year 21 000 000Year 31 150 000Year 41 200 000Year 51 200 000Year 61 300 000Year 71 500 000Year 81 700 000Year 92 000 000Year 102 200 000 Quickie Inc. expects to continue to grow infinitely using CAGR of the 10- year forecast period. Required return relevant to the company is at 12%. What is the compounded annual growth rate of 10-yr net cash flow projection?What is the terminal value incorporated in the net cash flow to firm computation?

Compounded annual growth rate formula = Ending valueBegining value1/ no.of years -1…

Answered: An Analyst is evaluating Quickie Inc.…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 2P

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

Year 1	1 000 000
Year 2	1 000 000
Year 3	1 150 000
Year 4	1 200 000
Year 5	1 200 000
Year 6	1 300 000
Year 7	1 500 000
Year 8	1 700 000
Year 9	2 000 000
Year 10	2 200 000

Quickie Inc. expects to continue to grow infinitely using CAGR of the 10- year forecast period. Required return relevant to the company is at 12%.

What is the compounded annual growth rate of 10-yr net cash flow projection?
What is the terminal value incorporated in the net cash flow to firm computation?

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