1. Review the Income Statement and Balance Sheet below:

2. Calculate the Free Cash Flow, assuming a 21% tax rate. Show your math. 3. Optional: Does this look like an attractive company to buy? Why or why not? 4. Optional: Compare your results to other students'. Do you agree/disagree? Why?

2018 2017 2017 $275 120 $155 15 $140 17 DPH TREE FARM, INC. Income Statement as of December 31, 2018 and 2017 (in millions of dollars) 2018 Net sales (all credit) $315 Less: Cost of goods sold 133 Gross profits $182 Less: Other operating expenses Earnings before interest, taxes, depreciation, and $165 amortization (EBITDA) Less: Depreciation and amortization Earnings before interest and taxes (EBIT) $152 Less: Interest Earnings before taxes (EBT) $136 Less: Taxes Net income $ 90 Less: Preferred stock dividends $ 10 Net income available to common stockholders $ 80 Less: Common stock dividends Addition to retained earnings $ 55 $ 20 $15 55 50 48 45 $123 $ 110 192 190 315 300 13 DPH TREE FARM, INC. Balance Sheet as of December 31, 2018 and 2017 (in millions of dollars) 2018 2017 Assets Liabilities and Equity Current assets Current liabilities Cash and marketable securities $24 $25 Accrued wages and taxes Accounts receivable 70 65 Accounts payable Inventory 111 100 Notes payable Total $205 $190 Total Fixed assets Long-term debt Gross plant and equipment $368 $300 Total debt Less: Accumulated 53 40 Stockholders' equity depreciation Net plant and equipment $315 $260 Preferred stock (5 million shares) Other long-term assets 50 50 Common stock and paid in surplus (20 million shares) Retained earnings Total $365 $ 310 Total Total assets $570 $500 Total liabilities and equity 16 12 $128 18 $110 40 $70 $ 10 $ 60 25 $ 35 46 $5 40 $ 5 40 25 210 155 $ 255 $ 200 $ 570 $500