Exhibit 2 - Template for Free Cash Flow Statement and NWC Requirements Free Cash Flow Statement Year 0 1 2 3 4 5 6 7 8 Revenues/Sales Cannibalization Net Revenues Cost of Goods Sold SG&A Expenses R&D Expenses Depreciation EBIT Taxes NOPAT Depreciation Capital Expenditures Adjustments for Liq. values ANWC Free Cash Flow NWC Calculations Year 0 1 2 3 6 7 8 Acc. Receivables Inventory Acc. Payables NWC ANWCProject B: Wind-Powered Water Purification Units: . The life of the project is expected to be 7 years. After year 7 no further revenue will be generated from this project. To determine the feasibility of the project GreenTech alreadyinvested $6 million in developing a prototype last year. The project requires an upfront (year 0) investment in new equipment for manufacturing of $26 million. The equipment will be depreciated using straight-line depreciation over eight years, starting in year 1. The equipment will be sold for $1 million at the end of year 7. Revenues from the project are expected to be $20 million in year 1 and will grow by 8% annually thereafter. After year 7 no further revenue will be generated from this project. Investing in this project is expected to enhance GreenTech's brand image, leading to an increase in overall company revenues by $2 million annually for years 1-3. Annual cost of goods sold are expected to be 45% of net revenues, and annual selling and general administrative expenses are expected to be 5% of net revenues. The project will require research and development expenses of $5 million in year 0, $2 million in year 1, and $1 million in year 2. For the purpose of this case the term net revenues refers to total revenues including project externalities, s.a. cannibalization. 3 The project will require net working capital of $3 million in year 0. Net working capital requirements will grow by 10% annually thereafter. All net working capital will be completely recovered by the end of year 8. The marginal tax rate of the company is 25%. The firm is profitable enough that it expects to offset any operating loss from this project against profits from other existing projects. The project is riskier than the average project of the firm. The relevant discount rate (cost of capital) is 12%. To finance the project, the firm will take out a bank loan with an interest rate of 4.5%. The bank loan will be repaid by the end of year 7.Produce a detailed free cash flow statement for Project B. Use a table similar to the one provided in the template in Exhibit 2 of this assignment for your calculations. (Since it's only a template you will have to make any necessary adjustments. This includes adding additional line items if necessary) Express all $-amounts in millions of dollars and round to two decimals