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BFIN3211 group is carrying out a set of analysis to decide whether to start a new company called BFIN Starters Inc (BS). If we start
BFIN3211 group is carrying out a set of analysis to decide whether to start a new company called BFIN Starters Inc (BS). If we start BS in 2023, BS will have no sales in 2023. BS is expected to have sales of $100 million in 2024 and the sales will grow at the rate of 10% in 2025; 30% in 2026; 10% in 2027; and 2% from 2028 on forever. We expect that net income will be 48% of sales (based on the estimation that EBIT to be 60% of sales and we have to pay a corporate tax rate of 20%). We expect that increases in net working capital requirements to be 9% of any increase in sales, capital expenditures to be 7% of sales, and depreciation expenses to be 6% of sales. The weighted average cost of capital is estimated to be 13%. To start the company, we need to invest $300 million at the end of 2023. What's the free cash flow of year 2028? (Please round your answer to the closest integer in the unit of million dollars.) Required return 0.13 Initial Investment ($ million) 300 Shares to issue 20 million Stillman Starters Inc. Project Free cash flow forecast ($million) Calendar Year 2023 2024 2025 2026 2027 2028 2029 Relative Year 0 1 2 3 4 5 6 sales growth - - 0.1 0.3 0.1 0.02 0.02 sales 0 100 160.446 NI (48% of sales) 77.01408 Plus Depreciation (6% sale) 9.62676 Less Capital Expenditure (7% sale) 11.23122 Less Increase in NWC (9% increase of sale) 0.28314 Free cash flow
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