A manufacturer of air filter systems for industrial facilities, is considering the addition of a new system to its current product line. The following data has been forecasted:

Years	2012	2013	2014	2015
Depreciation	30,000	35000	40000	45000
EBIT	100,000	125,000	150,000	175,000
Investment in Operating Assets	30,000	40,000	50,000	60,000

The market value of the firm's debt is $500,000 and it has $150,000 in marketable securities. The company also has 10,000 of preferred stocks that just paid an annual dividend of $0.75. Investors require a rate of return of 7% on preferred stocks of similar risk. Moreover, the firm has 200,000 shares of stock outstanding and its weighted average cost of capital is 15%. The expected tax rate is 35% in the next two years and 40% after that.

a. Calculate the free cash flow for each of the next three years.

b. After 2015 the firm's free cash flow is expected to grow at 5% per year indefinitely. What is the value of the stock today?