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you are the CFO of the Imaginary Products Co. the company provides the following information about its capital structure: Debt: the firm has 200,00 bonds

you are the CFO of the Imaginary Products Co. the company provides the following information about its capital structure:

Debt: the firm has 200,00 bonds outstanding with a pair value of $1,000, pays 9 percent interest (semi- annual coupon payments), have a maturity of 15 years and have a quoted price of 137.55 per bond.

preferred shares: the firm also has an issue of 2 million preferred shares outstanding with a market price of $12.00 per share. the preferred shares pay an annual dividend of 2.4 percent of the par value of $50.00.

common stock: the company also has 14 million shares of common stock outstanding with a price of $20.00 per share. the firm is expected to pay a $2.20 common dividend one year from today, and that dividend is expected to increase by 5 percent per year forever.

the firm is considering a 3 year expansion project (same operations as the existing projects of the firm) that requires a purchase of a machine of $210,000. there will be an increase in inventory of $150,000, accounts receiveable of $35,000, and accounts payable of $75,000. the machine will be in the 3- year MARCS class and the annual depreciation rates are 33 percent in year 1, 44 percent in year 2, 15 percent in year 3, and 8 percent in year 4.

the project is expected to generate Earnings Before Interest, Taxes, Deprecation, and Amortization (EBITDA) of $80,000 each year. At the end of the project (year 3) the machine can be sold for $25,000. the firms tax rate is 21 percent.

what are the free cash flows in years 0,1,2, and 3?

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