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Hi, can i know did we use the assumption of that all free cash flow will having a growth every year until perpetuity eventhough the question doesnt mention it? , is it the reasons why we need to find the growth rate in the question (i)?
Yes. Given that the company is retaining part of its earnings each year, investors (who determine the market value) will be expecting there to be rb growth in the future.
This is an assumption and the question asked for assumptions and the examiners answer does state this as an assumption.
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