Problem:
Zhdanov Inc. forecasts that its free cash flow in the coming year, that is, 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 4% forever.
Required:
Question: If the weighted average cost of capital is 14%, what is the firm's value of operations, in millions?
a. $158
b. $167
c. $175
d. $184
e. $193
Note: Explain all steps comprehensively.