Requirements: Calculate Summits:

a) Operating Cash Flows for Years 1 to 4, and

b) Free Cash Flows for Years 1 to 4.

Summit Inc. is planning an expansion project and has the following estimates relating to that particular project for the next four years in thousands): Year 1 Year 2 Year 3 Year 4 Units 1,250 1,250 1,250 1,250 Unit Price 200 206 212.18 218.55 Unit cost 100 103 106.09 109.27 Summit decides to buy an equipment costing $200,000. Shipping costs and installations are $20,000 and $20,000 respectively. Summit uses a 3-year MACRS class life method to compute for depreciation. The equipment can be sold after 4 years for $25,000. Taxes are 40%. Summit estimates that it needs net operating working capital of $30,000 at the start of the project and 12.36% of sales for subsequent years