Management also wants to see forecasts for free cash flows from 2018 to 2022 for the acquisition. The case states that the unit will stabilize after 2017. A typical way to forecast the FCF for a stable investment is to assume that sales will grow at a constant rate, and tie all of the FCF components to sales so that FCF also grow at a stable rate. In particular, forecast FCF for 2018 to 2022 by doing the following with data in exhibit 6:

B Find the percent of sales ratio for manufacturing, selling & administrative, and research & development expenses for 2017. Assume this stays the same from 2018 to 2022. (The idea is that your gross profit margin is stable)