Free cash flows present value calculation : 3-period model |

**Around the formula...**

Over three periods lasting n_{1} years,
n_{2} years, and up to infinity (for example : years 0 to 5, years 6 to
10, years 11 to infinity...), cash flow rises by g_{1} for n_{1}-1
years, then by g_{2} for n_{2} years and then by g_{3}
to infinity. Present value is then equal to:

This formula is useful when the growth rate is very high at the beginning of the period of projection, i.e. higher than the discounting rate, and then gradually declines.

Practically :

- The first period growth and length will depend on the company's "visibility", i.e. the period of time over which is it reasonable to establish projections,

- During the last period, free cash flows growth rate is similar to the one of the company's market or the economy as a whole or less,

- The second period making the transition between both periods...