The Deamon Seed, a chain of Garden Supply Stores had a free cash
flow for FY 2021 of $5,250 (all amounts are in $000). Stephen Kelley,
CEO, has developed a four year free cash projection, along with
estimated cost of capital during the 4 year period, and terminal growth and
cost of capital projections. -- a copy of which has been reproduced in the
table below.
From the end of
FY2022-FY2023 FY2024-FY2025 FY2025 to
Growth Rate
3.2%
Cost of Capital
4.25%
2.5%
5.20%
perpetuity
1.2%
4.80%
Considering this forecast he asked his CFO (you) to determine the
company's valuation using the NPV (net present value) method. Choose
the best answer from the list of options below.
For this question consider FY2022 as Year 1 and FY2025 as Year 4.
(NOTE THAT EXCEL WAS USED TO CALCULATE THE ANSWER TO
THIS PROBLEM)