You have been asked to examine a valuation of Kings Landing Construction, the top construction company in Westeros. You have been given last fiscal years income statement. The analyst assumed a perpetuity growth rate of 5% for revenues, operating income, and D&A. She forecasted a $3 million increase of capital expenditures to $160 million. Moreover, she assumed non-cash working capital will be 26% of the change in revenues. The firm has a marginal tax rate of 20%

Income Statement ($ millions)

Revenues 1000

Operating expenses 700

Depreciation and amortization 100

EBIT 200

a. Estimate the expected free cash flows to the firm for the next fiscal year. b. Calculate the expected level of after tax reinvestment for the firm in the next fiscal year. c. What is the return on capital being assumed in perpetuity by the analyst?