1 exhibit 1013 presents free cash ow and economic prot, Ask an Expert

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1. Exhibit 10.13 presents free cash ?ow and economic pro?t forecasts for ApparelCo, a $250 million company that produces men's clothing. ApparelCo is expected to grow revenues, operating pro?ts, and free cash ?ow at 6 percent per year inde?nitely. The company earns a return on new capital of 15 percent. The company's cost of capital is 10 percent. Using the key value driver formula, what is the continuing value as of year 5? Using discounted cash ?ow, what is the value of operations for ApparelCo? What percentage of ApparelCo's total value is attributable to the continuing value?

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