2. forecast the next 5 years of the income statement (including the Free Cash Flow) using the following assumptions:

   Sales will grow by 13% each year.

   COGS and SG&A will be forecast using the percent of sales technique.

   Depreciation will grow by 9% each year. ? Interest expense will grow by 11% each year.

    Flitwick's tax rate is 31%.

   CapEx and Change in NWC will grow by 12% each year.

    At the end of year 5, you will sell the company for $40,000,000 (note: this number should be added to the year 5 free cash flow).

    The appropriate discount rate is 16%.

   Once you've estimated the free cash flows, find the value of the firm (i.e. the present value of the free cash flows.)

   

3. 
   

Flitwick Corporation Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Sales $ 51,000,000 Cost of Goods Sold $ 29,500,000 Gross Profit Selling, General and Administrative Costs $ 7,800,000 Depreciation $ 3,300,000 Earnings Before Interest and Tax (EBIT) Interest Expense $ 2,100,000 Earnings Before Tax Taxes (31%) Net Income Operating Cash Flow CapEx Change in NWC Free Cash Flow EA $ 3,250,000 $ 2,200,000