• Calculate free cash flows for Valspar (that is, before the acquisition) for the five-year period 2016 through 2020? Use the assumptions provided below.

Additional Valspar Baseline (Stand-Alone) valuation assumptions:

• $60 million of Valspars current cash balance is considered excess cash.

• Sales growth (annual) 3.0%

• Terminal growth rate 2.5%

• COGS, R&D, SG&A, and Depreciation expense are a constant percentage of sales at 2015 levels

• Working capital is also a constant percentage of sales at 2015 levels

• The tax rate is the same as the implied tax rate from the 2015 income statement

• Capital expenditures are expected to be equal to depreciation expense each year.

Exhibit 3: Valspar Income Statements (in US\$000) Note: EBITDA = earnings before interest, taxes, depreciation, and amortization. Exhibit 3: Valspar Income Statements (in US\$000) Note: EBITDA = earnings before interest, taxes, depreciation, and amortization