Operating income Tax on operating income $2,620 891 Aftertax operating income $1,729 Add back depreciation 449 Less capital expenditures 522 Less change in working capital -203 Add proceeds from asset sales 3,545 Unlevered cash flow (UCF) Interest expenses Interest tax shields (T = 34%) 1989 1989 $3,384 1,151 $3,410 $3,645 $3,950 1,142 1,222 1,326 $2,268 $2,423 $2,624 475 475 512 525 -275 200 1,805 $5,404 $4,311 $2,173 $2,336 1990 1990 $3,004 1,021 1991 With respect to financial strategy, KKR planned a significant increase in leverage with accompanying tax benefits. Specifically, KKR issued almost $24 billion of new debt to complete the buyout, raising annual interest costs to more than $3 billion. Table 2 presents the projected interest expense and tax shields for the transaction. Table 2 Projected Interest Expenses and Tax Shields (in millions) 1991 $3,111 1,058 1992 1992 $3,294 1,120 475 538 225 1993 1993 $3,483 1,184 $4,310 1,448 $2,862 475 551 250 $2,536 You should use the data from Tables 1 and 2 to cal