We want to understand the relationship between sales growth rates $($s$)$ and project FCF growth

rates $(g).$

This is useful to think about, because in our spreadsheet models we often need an estimate

of $g$ but when we look for analyst forecasts, they often just apply to $s.$

We consider a hypothetical firm in which there are Sales, COGS, Depreciation, Taxes, ONWC,

and CAPEX occurring each year.

You know that sales growth is constant and equals s$.$

You further know that in any given year, COGS$/$Sales $=c_1,$ the tax rate is $p,$ the ratio of ONWC to

Sales is $n,$ and CAPEX$=$Depreciation, and Depreciation$/$Sales$=$d$.s,c,p,n$ and $d_{a}re$ constants ${?}_{(})$

$($i$.$e$.,$ fixed parameters that don't change over time$).$

Perform an algebraic series of calculations. Start with FCF $=($Sales $-$ COGS $-$ DA $-$ Taxes $-$

etcc$).$ Simplify the expression until it is in the form Sales $t_t^{**}((1-c-d)(1-p)-\frac{s}{(1+s{)}^{**}}n).$See attached photo. Perform an algebraic series of calculations per attached.