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PureFood Inc forecasts that its free cash flow in the coming year, i.e., at t=1, will...

PureFood Inc forecasts that its free cash flow in the coming year, i.e., at t=1, will be $10 million, but its FCF at t=2 will be $20 million. After Year 2 , FCF is expected to grow at a constant rate of 5% forever. If the weighted average cost of capital is 14%, what is the firm’s value of operations, in millions?
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Answer #1
FCF at T = 3    = 20 Million +5% = 21 Million
Intrinsic value at T-2 =   21 Million / (Required cost - Growth rate)
21 Million / (14-5)% = 233.33 million
Year Cashflows PVF at 14% Present value
1 10 0.877193 8.77193
2 20 0.769468 15.38935
2 233.22 0.769468 179.4552
Present value of operations 203.62 Million
Answer is $ 203.62 millions
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