*** Enter your answers in millions, rounding off to 2 decimals. For example, if your answer is 3,426,000 then enter 3.43; if your answer is 1,000,000 then enter 1.00

1. What is the Earnings before Interests, Taxes, Depreciation, and Amortization (EBITDA) for year 3?

2. What is the Earnings Before Interests and Taxes (EBIT) for year 3?

3. What is the NOPAT for year 3?

4. What is the free cash flow (FCF) for year 3?

RET Inc. currently has one product, low-priced stoves. RET Inc. has decided to sell a new line of medium-priced stoves. Sales revenues for the new line of stoves are estimated at $6 million a year. Variable costs are 70% of sales. The project is expected to last 10 years. Also, non-variable costs are $1 million per year. The company has spent $2 million in research and a marketing study that determined the company will lose (cannibalization) $0.8 million in sales a year of its existing low- priced stoves. The production variable cost of the existing low-priced stoves is $0.5 million a year. The plant and equipment required for producing the new line of stoves costs $2 million and will be depreciated using 7-year class MACRS depreciation. It is expected that the plant and equipment can be sold (salvage value) for $0.5 million at the end of 10 years. The new stoves will also require today an increase in net working capital of $0.4 million that will be returned at the end of the project. The tax rate is 25 percent and the cost of capital is 10%. MACRS Fixed Annual Expense Percentages by Recovery Class Year 3-Year 5-Year 7-Year 123 45 879 6 9 10 11 12 13 14 15 16 10- 15- Year Year 33.33% 20.00% 14.29% 10.00% 5.00% 44.45% 32.00% 24.49 % 18.00%9.50% 14.81% 19.20 %17.49% 14.40%8.55% 7.41% 11.52% 12.49 % 11.52%7.70% 11.52% 8.93% 9.22% 6.93% 5.76% 8.93% 7.37% 6.23% 8.93% 6.55% 5.90% 4.45% 6.55% 5.90% 6.56% 5.91% 6.55% 5.90% 3.28% 5.91% 5.90% 5.91% 5.90% 5.91% 2.95%