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Hewitt,

Thanks for the detailed discussion on your approach. I actually read it originally on Real Money and was confused a bit by your calculation of PV Operating Value (Years 1-10) and PV Terminal Value.

In your table, you show PV Y1-10 as $49 for the high estimate. However, that figure appears to be closer to the FV of compounded earnings 2.62*(1.13)^5*(1.065)^5 rather than the PV of earnings.

When I calculate PV Y1-10, I discount the growing annuity for years 1-5 and add that to the discounted growing annuity for years 6-10 which has also been discounted back to the present. This calculation results in a PV Y1-10 closer to $25 than $49.

I also can't recreate your PV Terminal Value of $21. For the PV Y11+ I discount the perpetual annuity and then also discount back to the present which results in a value closer to $36.

What am I missing? Thanks in advance for your Finance 101 guidance!
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