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Suppose Stacy management sets an annual revenue growth target of 20%. Estimate the free cash flows each year for the next five years 2006-2010. Project cash needs at 1% of sales, and project other items based on the 5-year historical, average financial ratios (all measured relative to sales*). Assume a tax rate of 35%.

Income Statement Sales Cost of Goods Sold R&D Expense SG&A Expense Operating Income (EBIT) Interest Expense Earnings before Tax Income Taxes Earnings (NI) Dividends to Retained Earnings 2001 1,604 842 158 367 237 8 229 85 144 0 144 2002 1,950 1,020 203 446 281 6 275 108 167 18 2003 2,240 1,226 240 479 295 5 290 107 183 28 155 2004 2,456 1,517 278 522 139 13 126 40 86 45 41 2005 3,017 1,739 327 549 402 14 388 141 247 49 198 149 2001 103 219 282 2005 30 431 584 Balance Sheet Cash Accounts Receivable Inventory Other Current Assets Current Assets Plant, Property & Equipment (net) Other Fixed Assets Total Assets 18 2002 58 283 348 22 711 482 39 1,232 2003 45 328 420 24 817 536 45 1,398 2004 17 349 500 28 894 610 49 1,553 32 622 410 32 1,064 1,077 686 61 1,824 Accounts Payable Accrued Expenses Short Term Debt Current Liabilities Long Term Debt Net Worth Liabilities & Net Worth 145 30 41 216 55 793 1,064 177 32 31 240 50 942 1,232 203 34 19 256 45 1,097 1,398 233 18 124 375 40 1,138 1,553 285 31 35 351 137 1,336 1,824 Income Statement Sales Cost of Goods Sold R&D Expense SG&A Expense Operating Income (EBIT) Interest Expense Earnings before Tax Income Taxes Earnings (NI) Dividends to Retained Earnings 2001 1,604 842 158 367 237 8 229 85 144 0 144 2002 1,950 1,020 203 446 281 6 275 108 167 18 2003 2,240 1,226 240 479 295 5 290 107 183 28 155 2004 2,456 1,517 278 522 139 13 126 40 86 45 41 2005 3,017 1,739 327 549 402 14 388 141 247 49 198 149 2001 103 219 282 2005 30 431 584 Balance Sheet Cash Accounts Receivable Inventory Other Current Assets Current Assets Plant, Property & Equipment (net) Other Fixed Assets Total Assets 18 2002 58 283 348 22 711 482 39 1,232 2003 45 328 420 24 817 536 45 1,398 2004 17 349 500 28 894 610 49 1,553 32 622 410 32 1,064 1,077 686 61 1,824 Accounts Payable Accrued Expenses Short Term Debt Current Liabilities Long Term Debt Net Worth Liabilities & Net Worth 145 30 41 216 55 793 1,064 177 32 31 240 50 942 1,232 203 34 19 256 45 1,097 1,398 233 18 124 375 40 1,138 1,553 285 31 35 351 137 1,336 1,824