Using the assumptions below, project HFs free cash flow (FCF) for each of the next three years:

• Sales will increase over the next three years at an annual rate of 10.5 percent.

• Cost of sales for fiscal 20X1 will be 66.5 percent. The ratio of cost of sales to sales is expected to decrease by 0.25 percentage points for each year 20X2 and 20X3.
• Selling, general, and administrative expenses (SG&A) will be 20.2 percent of sales for fiscal 20X1; 20.5 percent for 20X2; and 20.6 percent for 20X3.
• Depreciation expense will be forecasted over the next three years using the historical relation to sales.

• Capital expenditures will be forecasted over the next three years using the historical relation to sales.
• Net working capital will be forecasted over the next three years using the historical relation to sales.
• The tax rate is 37%.
• Free cash flow (FCF) beyond year 3 will grow at 4.0 percent forever.

• WACC is 9.5 percent.

		20X0	20X1	20X2	20X3	20X4	20X5
Revenues		88,519.0	93,830.1
COGS			61,749.2
SG&A			17,809.1
Depreciation			1,791.4
EBIT			12,480.4
Taxes			4,493.0
NOPAT			7,987.5
Depreciation			1,791.4
Operating cash flow			9,778.9