Question
Today is the last day of the current year. Iota Co's (Iota) sales this year was $500. Sales is expected to grow by $50 for
Today is the last day of the current year. Iota Co's (Iota) sales this year was $500. Sales is expected to grow by $50 for the next 10 years. The cost of goods sold was 45% of sales, and the EBIT margin was 30%, which is expected to stay constant in the future. For the next 3 years, capital expenditures will be 15% of sales and depreciation will be 10% of sales. Iota's working capital consists of accounts receivables, inventories, and accounts payables. The ending balance for the current year's accounts receivables is $45, inventory is $12, and accounts payable is $30. Iotas days sales outstanding, days inventory held, and days payable outstanding are expected to remain constant in the future. Iotas company tax rate is 35%. What is Iotas expected free cash flow for the next 3 years?
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