2.6. COMPREHENSIVE PROJECT FCF TCM Petroleum is an integrated oil company head- quartered in Fort Worth, Texas. Income statements for 2014 and 2015 are found below ($ millions):

	Dec-15	Dec-14
Sales	13368	12211
COGS	-10591	-9755
Gross Profit	2777	2456
Selling and administrative expense	-698	-704
Oper. Inc. before dep.	2079	1752
Dep. Depletion and amortalization	-871	-794
Oper. Profit	1208	958
Int. Exp.	-295	-265
Non. Oper. Inc or Exp.	151	139
Special iyems		20
Pretax Inc	1064	852
Taxes	425.6	340.8
Net Inc	638.4	511.2

In 2014, TCM made capital expenditures of $875 million, followed by $1,322 million in 2015. TCM also invested an additional $102 million in net working capital in 2014, followed by a decrease in its investment in net working capital of $430 million in 2015.

a. Calculate TCMs FCF for 2014 and 2015. TCMs tax rate is 40%.

b. Estimate TCMs FCF for 20162020 using the following assumptions: Operating income continues to grow at 10% per year over the next five years, CAPEX is expected to be $1,000 million per year, new investments in net working capital are expected to be $100 million per year, and depreciation expense equals the prior years total plus 10% of the prior years CAPEX. Note that because TCM is a going concern, we need not be concerned about the liquidation value of the firms assets at the end of 2020.