The “Question ” tab of the spreadsheet contains the most recent (“Year 0”) income statement for Flitwick Corporation. You’ll need to forecast the next 5 years of the income statement (including the Free Cash Flow) using the following assumptions:

 • Sales will grow by 13% each year. 

• COGS and SG&A will be forecast using the percent of sales technique.

 • Depreciation will grow by 9% each year. 

• Interest expense will grow by 11% each year. 

• Flitwick’s tax rate is 31%. 

• CapEx and Change in NWC will grow by 12% each year. 

• At the end of year 5, you will sell the company for $40,000,000 (note: this number should be added to the year 5 free cash flow). 

• The appropriate discount rate is 16%. Once you’ve estimated the free cash flows, find the value of the firm (i.e. the present value of the free cash flows.)

TranscribedText: Flitwick Corporation Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Sales $ 51,000,000 Cost of Goods Sold $ 29,500,000 Gross Prot Selling, General and Administrative Costs 55 7,800,000 Depreciation $ 3,300,000 Earnings Before Interest and Tax (EBIT) Interest Expense $ 2,100,000 Earnings Before Tax Taxes (3 1%) Net Income Operating Cash Flow CapEx $ 3,250,000 Change in NWC $ 2,200,000 Free Cash Flow

Flitwick Corporation Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Sales $ 51,000,000 Cost of Goods Sold $ 29,500,000 Gross Profit Selling, General and Administrative Costs $ 7,800,000 Depreciation $ 3,300,000 Earnings Before Interest and Tax (EBIT) Interest Expense $ 2,100,000 Earnings Before Tax Taxes (31%) Net Income Operating Cash Flow CapEx Change in NWC Free Cash Flow EA $ 3,250,000 $ 2,200,000