A group of investors is considering buying the Wheelwright Corporation, but does not want to contribute to the company€™s financial support after the purchase. Wheelwright€™s management has offered the following financial statements covering last year ($M omitted):

Wheelwright paid no dividends and sold no new stock during the year. The firm€™s tax rate is 30%.
a. Develop Wheelwright€™s free cash flow and make a recommendation as to whether it seems to be an appropriate acquisition for the investors.
b. Assume that the investors will purchase the company subject to its existing debt ($59M). Does that change your recommendation?

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Income Statement Balance Sheets Beginning Ending ASSETS Cash 100 Sales COGS* Depreciation 6 Gross Margin 60 Expenses EBIT Interest EBT Tax Net Income 20 *Cost of Goods Sold Accts Receivable 13 12 20 Inventory Current Assets 36 25 35 7 28 Fixed Assets 100 88 119 115 (18) 97 Gross Accum Deprec 12) Net Fixed Assets Total Assets 133 LIABILITIES & EQUITY Accts Payable Accruals 21 29 45 133 17 Debt Equity Current Liabilities 23 71 25 Total Liabilities & Equity119