From Exhibit 4a and 4b, make a projection of FCFs for the Ecoliving division, assuming that the 
difference between 4a and 4b is wholly due to that division. Determine which growth rate (for 
the final FCF, into perpetuity) would make the CF overview for EcoLiving consistent with what 
external parties are offering. Also give at least 2 other arguments why 
such a difference would exist in reality.

Exhibit 4a: Five-Year Cash Flow Projection for Pinewood - Assuming no Sale of EcoLiving, 2011-2015 (U.S. $ millions)
	2011	2012	2013	2014	2015
Sales growth	6.8%	6.0%	5.5%	4.5%	3.5%
Gross margin	12.5%	13.0%	13.5%	13.5%	13.5%
Operating margin	2.0%	3.0%	4.0%	4.5%	4.5%
Sales	934.8	990.9	1,045.4	1,092.5	1,130.7
Gross profits	116.9	128.8	141.1	147.5	152.6
Operating profits	18.7	29.7	41.8	49.2	50.9
Income tax	6.5	10.4	14.6	17.2	17.8
Net operating profits after tax	12.2	19.3	27.2	32.0	33.1
Depreciation & amortization	26.6	27.8	29.9	30.8	31.1
Change in Net WC and accrued taxes	4.9	(9.7)	(9.6)	(5.9)	(5.1)
Capex	18.2	11.2	11.5	11.9	9.9
FCFa	15.7	45.6	55.2	56.8	59.4
Exhibit 4b: Five-Year Cash Flow Projection for Pinewood - Assuming Sale of EcoLiving, 2011-2015 (U.S. $ millions)
	2011	2012	2013	2014	2015
Sales growth	3.5%	3.5%	3.0%	2.5%	2.5%
Gross margin	11.5%	11.5%	12.0%	12.0%	12.5%
Operating margin	1.0%	2.0%	2.5%	3.5%	3.5%
Sales	507.3	525.1	540.8	554.4	568.2
Gross profits	58.3	60.4	64.9	66.5	71.0
Operating profits	5.1	10.5	13.5	19.4	19.9
Income tax	1.8	3.7	4.7	6.8	7.0
Net operating profits after tax	3.3	6.8	8.8	12.6	12.9
Depreciation & amortization	12.2	13.0	13.5	13.8	14.0
Change in Net WC and accrued taxes	2.2	(3.5)	(3.3)	(2.2)	(1.4)
Capex	4.1	2.6	2.8	2.9	2.1
FCFb	9.2	20.7	22.8	25.7	26.2
a Perpetual growth of FCF after 2015 is assumed to be 3.5%
b Perpetual growth of FCF after 2015 is assumed to be 2.5%

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