Use the provided information and the percent of sales method to forecast free$-$cash$-$flows. Use the average historical ratios in your forecast.

Assumptions

Sales growth

$20\%$

Corporate tax rate

$21\%$

Minimum cash balance

$$$ $5\mathrm{.}00$

Depreciation expense

$$$ $10\mathrm{.}00$

Interest rate on debt

$10\%$

Actual

Projection

Average FCF

$1$

$2$

$3$

Balance sheet

$2018$

$2019$

$2020$

$2021$

$2022$

Cash$($plug$)$

$$$ $16\mathrm{.}00$

$$$ $34\mathrm{.}74$

Current$$ Assets

$$$ $49\mathrm{.}00$

$$$ $46\mathrm{.}00$

Fixed assets, net

$$$ $85\mathrm{.}00$

$$$ $86\mathrm{.}00$

Total Assets

$$$ $150\mathrm{.}00$

$$$ $166\mathrm{.}74$

Current liabilities

$$$ $37\mathrm{.}00$

$$$ $54\mathrm{.}00$

Long$-$term debt

$$$ $48\mathrm{.}00$

$$$ $46\mathrm{.}00$

Debt needed $($plug$)$

$$$ $-$

$$$ $-$

Retained Earnings

$$$ $65\mathrm{.}00$

$$$ $66\mathrm{.}74$

Total liabilities and equity

$$$ $150\mathrm{.}00$

$$$ $166\mathrm{.}74$

Income statement

$2018$

$2019$

Sales

$$$ $57\mathrm{.}00$

$$$ $49\mathrm{.}00$

COGS

$$$ $31\mathrm{.}00$

$$$ $23\mathrm{.}00$

Gross margin

$$$ $26\mathrm{.}00$

$$$ $26\mathrm{.}00$

Operating expense

$$$ $10\mathrm{.}00$

$$$ $9\mathrm{.}00$

Depreciation

$$$ $10\mathrm{.}00$

$$$ $10\mathrm{.}00$

EBIT

$$$ $6\mathrm{.}00$

$$$ $7\mathrm{.}00$

Interest

$$$ $4\mathrm{.}80$

$$$ $4\mathrm{.}80$

EBT

$$$ $1\mathrm{.}20$

$$$ $2\mathrm{.}20$

Taxes

$$$ $0\mathrm{.}25$

$$$ $0\mathrm{.}46$

Net income

$$$ $0\mathrm{.}95$

$$$ $1\mathrm{.}74$

Total Assets $($except cash$)$

Plus: Minimum required cash balance

Less: Liabilities and equity $($except debt needed$)$

Debt needed or $($excess cash$)$

Financial ratios as a percentage of sales

Acutal

Projection

Balance sheet

$2018$

$2019$

$2020$

$2021$

$2022$

Current$$ Assets

Fixed assets, net

Current liabilities

Income statement

COGS

Operating expense

Estimate $$NWC

Acutal

Projection

$2018$

$2019$

$2020$

$2021$

$2022$

Adj. Current assets

Less: Adj. Current liabilities

NWC

$$NWC

Estimate FCF

Acutal

Projection

$2018$

$2019$

$2020$

$2021$

$2022$

EBIT$(1-$tc$)$

Plus: Depreciation expense

Less: $$NWC

Less: Capital Expenditures

Find the average FCF