how is the -307 change in WC calculated?

allT-Mobile 10:28 @ 79% coursehero.com to use some of the free cash flows to repay the debt until the end of Year 3, but they will continue to pay some dividends in Years 1 through 3. As of the beginning of Year 4, they expect the company's cash flows to grow at the long-run inflation rate, which they expect to be 2.5%. At the end of Year 3, they believe that the company will have paid down a sufficient amount of debt so that the remaining debt will be used as the basis of a stable target capital structure, and the debt will grow at the overall growth rate of 2.5%. While the leverage of the company will decline some over the first three years, it will not fall enough to change the cost of debt. Moreover, since the debt-to-value ratio will stay the same after Year 3, the cost of debt will remain at 10%. The company does not hold any excess cash, and all equity free cash flows will be paid out as a dividend to shareholders. The company's chief financial officer prepared a set of financial forecasts that reflects this plan. The income statement, balance sheet, and cash flow statement forecasts appear in Exhibit P5.1. The forecasts assume the company will issue the debt at the end of Year 0, which is reflected in the balance sheet for that year. Germunder's income tax rate for all revenues and expenses (including interest) is 40%, and its unlevered cost of capital is 12%. a. Use the financial statements in the exhibit to measure Germunder's unlevered free cash flows in Years I through 4. Germunder and Company Free Cash Flow Forecasts Actual Forecast Forecast Forecast Forecast Year 0 Year 1 Year 2 Year 3 Year 4 Free Cash Flow: Earnings Before Interest and Taxes 3,986 S 6,014 $ 6,451 $ 6,400 $ 6,560 - Income Taxes Paid on EBIT -1.594 -2,405 -2,580 -2.560 -2,624 Earnings Before Interest and After Taxes 2,392 S 3,608 $ 3,870 $ 3,840 $ 3,936 + Depreciation Expense 1,273 1,875 2,226 2.494 2,557 Change in Required Cash -8 -44 -13 - Change in Net Operating Working Capital 151 -307 -197 -54 -56 -Capital Expenditures -6.020 -3,518 -2,678 -2,958 -3.031 Unlevered Free Cash Flow 2,515 S 1,614 $ 3,208 $ 3,319 $ 3,402 - Interest Paid in Cash -1,500 -1,440 -1,320 -1,190 + Interest Tax Shield 600 576 528 476 + Change in Debt Financing 15,000 -600 -1,200 -1,300 297 Equity Free Cash Flow 12,485 S 114 $ 1,144 $ 1.227 $ 2,985 b. Value Germunder - the entire firm and equity - as of the end of Year 0 using the APV valuation method. Assume that the appropriate discount rate for interest tax shields is the unlevered cost of capital of the company. Cambridge Business Publishers, 2014 11 Corporate Valuation: Theory, Evidence & Practice, 1" Edition Ask Expert Tutors