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Net income$60,000+ Depreciation+$6,000 - Capital Expenditures-$7,000 - Increases in Working Capital -$2,000
=Free Cash Flow$57,000
Vega Music's projected net income and free cash flows are given above in thousands of dollars. Vega expects their free cash flows to increase by 5% per year. If Vega were able to reduce its annual increase in working capital by 15% without affecting the growth rate of their free cash flows, what would be the effect of this reduction on Vega's value, given a cost of capital of 14%?
Select one:
a. an increase of $633333
b. an increase of $6000
c. an increase of $222
d. an increase of $3333
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