Question
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
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 $1million 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?
Pro Forma
Year 3
Sales $
COGS
Depreciation
EBIT
Tax
Earnings
Depreciation
Net working capital
Free cash flows
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