1. ABC Corp is a truck leasing, maintenance, and rental firm with operations in North America and Europe. Below are selected numbers from the financial statements for 2014 and 2015 (in millions).

	2014	2015
Revenues	$5,192.0	$5,400.0
(Less) Operating Expenses	($3,678.5)	($3848.0)
(Less) Depreciation	($573.5)	($580.0)
= EBIT	$940.0	$972.0
(Less) Interest Expenses	($170.0)	($172.0)
(Less) Taxes	($652.1)	($670.0)
= Net Income	$117.9	$130.0
Working Capital	$92.0	<$370.0>
Total Debt	$2,000 mil	$2,200 mil

The firm had capital expenditures of $800 million in 2014 and $850 million in 2015. The working capital in 2014 was $34.8 million, and the total debt outstanding in 2014 was $1.75 billion. There were 77 million shares outstanding, trading at $29 per share.

1. Estimate the cash flows to equity in 2014 and 2015.

2. Estimate the cash flows to the firm in 2014 and 2015.

3. Assuming that revenues and all expenses (including depreciation and capital expenditures) increase 6%, and that working capital remains unchanged in 2016 estimate the projected cash flows to equity and the firm in 2016. (The firm is assumed to be at its optimal financial leverage.)

4. How would your answer in (c) change if the firm planned to increase its debt ratio in 2016 by financing 75% of its capital expenditures (net of depreciation) with new debt issues?