8 Liquidity planning. You have now been requested to calculate WestWood’s free cash flow (FCF) for the current and future years. The following information is relevant:

• Depreciation is to be calculated at 15 per cent of administrative expenses.

• Dividends are calculated at 20 per cent of after tax profits.

• Capital expenditure (i.e. investment) in the current year is nil. Hint: it is only the annual increase in investment expenditure which is relevant in calculating each year’s free cash flow.

Do you think WestWood will have any difficulty in financing its investments and operations over the planning term? Comment on your findings. For convenience and presentation round your calculations to the nearest £000.