Exhibit 14 From Year 2019 Onward Growth in OFCF Is Expected to

Exhibit 14.8
Use the Information Below for the Following Problem(S)
At the end of the year 2010 the CKL Corporation had operating free cash flow (OFCF) of $300,000 and shares outstanding of 100,000. Total debt is currently $10,000,000. The company projects the following annual growth rates in OFCF
$$\begin{array} { c c } \text { Year } & \text { Grapth Rata } \\\hline 2011 & 25 \% \\2012 & 20 \% \\2013 & 15 \% \\2014 & 10 \% \\2015 & 12 \% \\2016 & 14 \% \\2017 & 16 \% \\2018 & 18 \%\end{array}$$
From year 2019 onward growth in OFCF is expected to remain constant at 5% per year. The stock has a beta of 1.1 and the current market price is $80. Currently the yield on 10-year Treasury notes is 5% and the equity risk premium is 4%. The firm can raise debt at a pre-tax cost of 9%. The tax rate is 25%. The proportion of equity is 55% and the proportion of debt is 45%.
-Refer to Exhibit 14.8.Calculate the required rate of return on equity.

A) 8.2%
B) 9.4%
C) 9.0%
D) 10.3%
E) 7.3%