On the next pages, you find simplified financial statement information for Starbucks $($SBUX$),$

downloaded from www$.$finance.yahoo.com. Use this information to estimate the Free Cash Flow

that the firm generated in the years $2004$ and $2005.$ Use both the bottom$-$up and the top$-$down

formulas. You can use the following additional information, obtained from the firm$$s Annual

Report $($or $10$K$)$:

$$ The total Depreciation and Amortization amounts for the years $2004$ and $2005$ were $325,650$

and $377,304,$ respectively $($in $$1,000$s$).$ Parts of these amounts have been included in Selling,

General and Administrative Expenses, and the rest has been included Cost of Revenues in the

Income Statement. The Earnings Before Interest and Taxes $($EBIT$)$ therefore reflects the firm$$s

operating profit net of Depreciation and Amortization.

$$ The Property, Plant and Equipment on the balance sheet is reported net of accumulated

Depreciation, so it reflects the net book value of the firm$$s Property, Plant and Equipment.

The Goodwill and Intangible Assets are also expressed on a net book value basis, and reflect

investments Starbucks made in long$-$tem intangible operating assets.

$$ The Long$-$Term Investments reported on the balance sheet reflect investments in financial

assets $($such as marketable securities$)$ from its excess cash reserves, not in operating assets.

The same applies to short$-$term investments.

$$ Cash and Cash Equivalents represent the cash that the firm needs to support its operating

activities $($this item was about $2-5\%$ of the firm$$s Net Revenue$).$ Other Current Assets include

Prepaid Expenses. Other Current Liabilities include Deferred Revenues and Accrued

Expenses. These items are therefore part of the operating Net Working Capital of the firm.