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Traver - Dunlap Corporation's has a 1 5 % weighted average cost of capital ( WACC ) . Its most recent sales were $ 9

Traver-Dunlap Corporation's has a 15% weighted average cost of capital (WACC). Its most recent sales were $980 million and its
total net operating capital is $970 million. The following shows estimates of the forecasted growth rates, operating profitability
ratios, and capital requirement ratios for the next three years. All of these ratios are expected to remain constant after the third
year. Use this information to answer the following questions.
Estimated Data for Traver-Dunlap Corporation
2-a. Use the data to forecast sales, net operating profit after taxes (NOPAT), total net operating capital (OpCap), free cash flow
(FCF), growth rate in FCF, and return on invested capital (ROIC) for the next three years. What is the FCF growth rate for Year
3 and how does it compare with the growth rate in sales? What is the ROIC for Year 3 and how does it compare with the 15%
WACC?
2-b. What is the value of operations at Year 3,Vp,3? What is the current value of operations, Vop,0? How does the value of
operations at Year 0 compare with the total net operating working capital at Year 3, and what might explain this relationship?
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