You are evaluating a new product. In year 3 of your analysis, you are projecting pro forma sales of

$5

million and cost of goods sold of

$3

million. You will be depreciating a

$1

million machine for

5

years using straight-line depreciation. Your tax rate is

21%.

Finally, you expect working capital to increase from

$200,000

in year 2 to

$300,000

in year 3. What are your pro forma earnings for year 3? What are your pro forma free cash flows for year 3?

Complete the following pro forma statement.(Round to the nearest dollar.)

Pro Forma		Year 3
Sales	$
COGS
Depreciation
EBIT
Tax
Earnings
Depreciation
Net working capital
Free cash flows