Nente Co.

Sir,
In June 2012 Q#1 (i) the examiner calculate two growth rate Past and Future.
Future growth rate calculation confusing me.

Please explain it and if possible give another example from your own.

(See the Eaxminer working)
(“Company value = Free cash flows (FCF) x (1 + growth rate (g))/(cost of capital (k) – g)
k = 11%
Past g = (latest profit before interest and tax (PBIT)/earliest PBIT)1/no. of years of growth – 1
Past g = (1,230/970)1/3 – 1 = 0·0824
Future g = ¼ x 0·0824 = 0·0206”)