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You have just been hired by International Business Machines Corporation (IBM) in their capital budgeting division. Your first assignment is to determine the free cash flows and attractiveness of a proposed new type of tablet computer similar in size to an iPad but with the operating power of a high-end desktop system. Your job is to determine the cash flows associated with this new product, using the format gone over in class. In addition to the sections of the cash flow statement, you should prepare a concise presentation of any calculations that were required to develop your own assumptions. Remember that your personal success is tied to your ability to get your project approved, and even the best projects and analysis dont get approved if the work is not clear. Since your boss hasnt been much help (welcome to the real world!), here are some tips to guide your analysis: 1. Obtain IBMs 2022 Annual Report, and reference the financial statements and notes on pages 43-120 (for consistency in your ratio analysis, use Revenues in place of Sales in ratios that require it). 2. The product is expected to have a life of five years. 3. First-year revenues for the new product are expected to be 3% of IBMs total revenue for 2022. a. The new products revenues are expected to grow at 15% for the second year then 10% for the third, and 5% annually for the final two years of the expected life of the project.

4. Your boss has indicated that the operating costs and profitability are similar to IBMs existing projects in the latest fiscal year, so estimate each year by using the 2022 EBITDA/Sales profit margin. You will have to calculate historical EBITDA using the Income Statements Income from Continuing Operations and data from the Cash flows from operating activities section of Statement of Cash Flows

Consolidated Income Statement International Business Machines Corporation and Subsidiary Companies Amounts may not add due to rounding. The accompanying notes are an integral part of the financial statements