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Estimate the free cash flow to firm for each of four years

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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.

Reference no: EM132946126

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