Consider a firm with the following cash flows as of year 0:

Sales $300 million

Cost of goods sold 40% of Sales

Selling, General, & Admn. Expenses 20% of Sales

Depreciation 15% of Sales

Capital Expenditures 15% of Sales

Net Working Capital 5% of Sales (incurred for the first time in year 0).

Tax Rate 35%

The Sales of the company is expected to grow at a 12% rate over the next two years, and at a constant rate of 6% annually thereafter (i.e., Sales for years 1 and 2 would be 12% more than the previous year’s Sales, while Sales for years 3 and after would be 6% more than the previous year’s Sales).

Compute the Free Cash Flows (FCF) to the firm at the end of years 1 through 3.