Now lets put everything together and try to calculate the (projected) FCF of the firm LuluYoga for 2018.

Here is some financial information you have gathered with the help of your intern peers and supervisors at the investment bank.

The analyst team has been talking to the management of LuluYoga and they estimate that sales are going to grow by 5% from 2017 to 2018.

Financial ratios that will allow you to compute the different component of FCF are in the table. Use the historical 3-year average for all financial ratios as your estimate of the financial ratio in 2018, with two exceptions: ARDOH and APDOH. You talked to senior managers of the firm and are very confident that in 2018 AR/DOH will be 45 and AP DOH will be 20.

The corporate tax rate is 35%

	2015	2016	2017	2018 (projected)
Sales	4,000,000	6,000,000	9,000,000
COGS/Sales	60.20%	60.60%	60.40%
OpExp/Sales	23.00%	22.80%	22.60%
AR/DOH	29	35	36	45
Inv DOH	45	44	46
NFATO	13	13.5	13.2
AP DOH			20	20
Initial inventory	196,877

Q3. What is the change in net PPE?

Hint: first calculate the net PPE in year 2017 using NFATO ratio. Second calculate the net PPE in year 2018 using Sales/PPE,net ratio, which you may need to calculate for year 2015 through 2017 in order to get the mean value for 2018.

Select the best answer from the following:

A. 32,288

B. 681,818

C. 714,106