The savings (Operating expenses) achieved through the installation of the IT infrastructure are, for each of the five years is:				6	million dollars
							1. Calculate RSI's EBIT (Earnings before interest and taxes)
2. Calculate RSI's free cash flow from 2018 through 2022.
3. Estimate the net present value (NPV) of RSI's free cash flow for the years 2018 to 2022. CRU's Weighted Average Cost of Capital (WACC) is 8.0 percent. Radio Systems, Inc. WACC is 11.5 percent.
4. Calculate the additional Free Cash Flow as a result of the synergistice savings of investing in the IT Infrastructure.
Data With Infrastructure Installation
Radio Systems, Inc.
INCOME STATEMENT ($ millions)
	Actual	Forecast
	2017	2018	2019	2020	2021	2022
Net sales	$1,996	$2,267	$2,508	$2,827	$3,138	$3,571
Cost of sales	644	742	830	959	1,087	1,241
Gross income	1,352	1,525	1,678	1,868	2,051	2,330
Depreciation and Amortization	492	785	1,061	1,301	1,009	917
Interest expense	171	178	191	175	142	110
Operating expenses	212
Net income before tax	477	562	426	392	900	1,303
Provision for taxes	186	126	61	34	221	363
Net income after tax	$291	$436	$365	$358	$679	$940
BALANCE SHEET ($ millions)
Cash and securities	$358	$413	$462	$545	$618	$704
Accounts receivable	208	236	267	309	354	405
Inventory	399	463	541	629	739	864
Other current assets	156	122	142	167	212	206
Total current assets	1,121	1,234	1,412	1,650	1,923	2,179
Gross property and equipment	4,180	5,149	6,410	7,449	8,200	9,016
Accumulated depreciation	868	1,654	2,714	4,015	5,024	5,941
Net property and equipment	3,312	3,495	3,696	3,434	3,176	3,075
Goodwill	1,069	1,069	1,069	1,069	1,069	1,069
Total assets	5,502	5,798	6,177	6,153	6,168	6,323
Accounts payable	104	77	91	110	117	135
Short-term debt	335	482	842	814	585	393
Current portion long-term debt	41		165	200	223	267
Accrued expenses	86	97	120	134	174	168
Total current liabilities	566	796	1,218	1,258	1,099	963
Long-term debt	1,694	1,554	1,389	1,189	966	699
Deferred taxes	335	344	370	454	505	496
Shareholders' equity	2,907	3,104	3,200	3,252	3,598	4,165
Total liabilities and equity	$5,502	$5,798	$6,177	$6,153	$6,168	$6,323
Earnings before interest and taxes
Tax rate		22.4%	14.3%	8.7%	24.6%	27.9%
EBIT(1-tax rate)		-	-	-	-	-
Depreciation and Amortization		785	1,061	1,301	1,009	917
Capital expenditures		969	1,261	1,039	751	816
Working capital	931	1,060	1,201	1,406	1,632	1,876
Change in working capital		129	141	205	226	244
Free cash flow1
Net Present Value (NPV) of free cash flows for the years 2018-2022 after IT savings
Increase (Decrease) in Free Cash Flow as a result of the five year IT Infrastructure investment
EBITDA after IT Investment
Cumulative EBITDA of years 2018-2022, after IT Investment						-
Increase (Decrease) in EBITDA after IT Investment