Reference no: EM132946126

You are provided with the projected income statements for a project:

Year                             1                   2                3                   4

Revenues              10000         11000        12000       13000

Cost of Goods Sold    4000          4400        4800           5200

Depreciation           4000             3000         2000        1000

EBIT                     2000                 3600       5200       6800

Additional Information

• The tax rate is 40%
• The project required an initial investment of $15,000 and an additional investment of $2,000 at the end of year 2
• The working capital is anticipated to be 10% of revenues, and the working capital investment has to be made at the beginning of each period

Problem 1: Estimate the free cash flow to the firm for each of the four years.