The projected net income and free cash flows next year for Emerald City Paints are given in the following table in $ thousands:

Emerald City expects capital expenditures and depreciation to continue to offset each other, and for both net income and increase in working capital to grow at 4% per year. Emerald City’s cost of capital is 12%.
If Emerald City were able reduce its annual increase in working capital by 20% by managing its working capital more efficiently without adversely affecting any other part of the business, what would be the effect on Emerald City’s value?

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Net Income + Depreciation - Capital Expenditures - Increase in Working Capital = Free Cash Flow 20,000 +5,000 -5,000 -1,000 19,000