• 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.

\begin{tabular}{|l|r|r|r|} \hline \multicolumn{1}{|c|}{} & December 25, 2013 & December 31, 2014 & December 30, 2015 \\ \cline { 2 - 4 } & & & \\ \hline Revenue & 10,186 & 11,130 & 11,339 \\ \hline Cost of Goods Sold & 5,400 & 5,816 & 5,609 \\ \hline Gross Profit & 4,786 & 5,313 & 5,730 \\ \hline Selling, General, \& Administrative Expenses & 3,468 & 3,682 & 3,914 \\ \hline EBITDA & 1,318 & 1,631 & 1,817 \\ \hline Depreciation & 169 & 170 & 171 \\ \hline Net Interest Expense & 54 & 56 & 57 \\ \hline Other (Income) Expense-Net & 29 & 146 & 41 \\ \hline Earnings Before Taxes & 1,067 & 1,258 & 1,548 \\ \hline Income Tax Expense & 314 & 392 & 494 \\ \hline Net Income & 753 & 866 & 1,054 \\ \hline \end{tabular}