Now, let's talk about free cash flow valuation of the firm. This is the most widely used, widely accepted approach that deals with some formulas. And again, oftentimes, people also use spreadsheets. But we on this flip chart will use the formula approach which is actually absolutely equivalent to spreadsheets. So, this is free cash flow valuation. Well, the good news is that we will be able to use a lot, what we know from our corporate finance course. And first of all, we introduce value drivers. Well, value drivers are numbers or components that we'll feed the formula with. But they actually determine the value of the company. And when we see them, most of them are quite familiar. Let's start with, first of all, the first value driver is Earnings Before Interest and Taxes at point zero because we are interested in the value of the company now at point zero. Now the next one is the tax rate because we remember that before we paid any taxes, we cannot use any cash flow. So this is the before tax rate and this is the before tax earnings and this is the tax rate. Then the next thing is the investment rate. Well, in corporate finance we use the Naver, word that we talked about, the power bank rate, but this is basically the same. So, this is what feeds growth. We will see that for no growth cases, B will be equal to zero. Now, there is also one more very important value driver of this is profitability that we'll talk about in some detail a little bit later but for now we will say that the combination of investment rate and the profitability, as you might remember from corporate finance, gives you the rate of growth. So for now, we will use that in the direct form. So, this is the growth rate. Then also we need n, which is the number of years for which we make explicit forecasts. And then from the n plus first year, we will switch on the tail or the post forecast period set of cash flow. So, I will put that as the time horizon for the forecast. And then finally, clearly this is the cost of capital, weighted average cost of capital. This is the discount rate. So these are all value drivers. And for now, for this episode and then the next one, we will take those as givens. And then later on, we will say a few words about how we extract them from the financial information of the company, then also from its strategic plans, and so on, and so forth. But for now, I will produce some formulas that will give you the value of the company based on these value drivers. Well, we will analyze some special cases, case one, no growth. Well, we know that no growth case is the same as perpetuity. And for this, we expect to have a very straightforward and simple formula. Indeed V for no growth is X_sub_zero times one minus T divided by K. This is WACC, and just K. So, this is great. Look, there is no growth, so B is zero. And then although there is profitability here but we can see that whatever amount of earnings we make, we paid out. Now, the next case is constant growth. Again, well, people say great, this is sort of growing perpetuity. And here, we introduced another very important thing as we did on the previous page which is G. This is the growth rate. So, we expect that to enter the formula. Indeed, the formula now is a little bit more cumbersome but still straightforward. So, the same X_sub_zero times one minus T which is the basis. Now, there is one minus B which is the investment rate that comes into play, then one plus G and in the denominator we have K minus G. Well, this formula works for K that is greater than G because otherwise, it's negative. But we know that the constant growth cannot be higher than the weighted average cost of capital. So, there is no mistake here. Well, but these are special cases. And now, on the next page, we provide the more general case. And this is the case that is while there are going to be two cases on this page and they basically are used in all feasible cases of valuation. So first of all, this is case 3A. This is temporary so-called supernormal growth and then no growth. Well, when we talk about supernormal, that doesn't have to be very fast. That just means that now remember this N the time horizon. So for this N periods, normally N years, we say that the company grows at a certain rate. And then beyond this N, there are two options. One, there's no growth. So, this is this case. And then case 3B will be constant growth that is normally slower. So, the formula here becomes somewhat more cumbersome, I would say. So what I would put, but this is the central formula so this is important to remember that. So this is B_sub_zero is equal to X_sub_zero, one minus T, one minus BS, that stands for supernormal growth. And here comes the following sum T from one to N, which is the time horizon, and here comes one plus GS divided by one plus K, and all that to the t-th power. So, this is the sum and this is the so-called the first part of the first term and then comes the second part which is X_sub_zero times one minus T divided by K. And here comes one plus GS divided by one plus K and all that to the nth power. So, this is oftentimes called tail or terminal value. Now, this is the most general formula that is used in all valuations. And normally, people just put that slowly in their computers to make sure that they do not commit mistakes and then use it thereafter. Now, case 3B also very widely used. This is temporary supernormal growth plus constant growth. Now clearly, in this case, the first term will stay the same. So, I will not put that, otherwise, it will be too many numbers or too many formulas on this page. But I would say that in this case, the terminal value or tail changes somewhat. Here, it's just this. Now, it will be X_sub_zero times one minus T times one minus bC, so that is the b for constant growth. That is different from this B for supernormal growth. And then it's also one plus GC divided by K minus GC, and here comes this one plus GS, one plus K to the nth power because basically, why is this the same? Because the base for no growth over super supernormal growth is the same. But then, this refers to the new growth at the constant rate of GC. This refers to no growth. So, we are almost all set here and in the next episode, I will just provide some shortcuts and then examples for that.