Example 3: Slim Shady, the chief executive officer of M&N Corporation, has asked his chief financial officer, Rocky Shamo, to prepare a valuation of M&N for the purpose of selling the company to a private investment partnership. M&N is a profitable $427719367 annual sales manufacturer. Shamo assumes for the next 12 months that M&N's revenues increase by the longterm annual growth rate of 3 percent. She also makes the following assumptions to calculate the free cash flow to the firm for the next 12 months: Gross profit margin is 41 percent. Depreciation is 2 percent of revenues. Selling, general, and administrative expenses are 24 percent of revenues. Capital expenditures equal 121 percent of depreciation to support the current level of revenues. Additional capital expenditures of 16 percent of incremental revenues are needed to fund future growth. Working capital investment equals 6 percent of incremental revenues. Marginal tax rate on EBIT is 30 Your task is to estimate the free cash flow to the firm.