Projecting Free Cash Flows Using a Sales-driven Approach to DCF Valuation. Project Target Corporation (NYSE: TGT) (https://finance.yahoo.com/quote/TGT/) free cash flows to the firm (FCFF) over the next five years (that is, for fiscal years 2024 to 2028) using sales revenue as your basis for projection. Follow the instructions below.

a) For FY 2024 to 2028, project sales revenues. Fully justify your forecasts of sales growth rates.

b) For FY 2024 to 2028, project the following income statement items as ratios to sales revenue. The ultimate goal here is to project net operating profits after taxes (NOPAT). Fully explain and justify your projection of each of the ratios: i) Cost of goods sold (COGS) ii) Selling, general, and administrative (SG&A) expenses iii) Depreciation and amortization iv) Operating profits v) Net operating profits after taxes (NOPAT) In addition, explain how you estimated effective tax rates for NOPAT.

c) For FY 2024 to 2028, project the following balance sheet items as ratios to sales revenue. The ultimate goal here is to project invested capital (IC). If you think it is sensible, you can choose to combine some line items in your projections (e.g., items that are of a tiny fraction of sales). Fully explain and justify any aggregation you use and your projection of each of the ratios: i) Current operating assets: sum of the following items Operating cash (you can assume 2% of revenue, if you prefer) Accounts receivables & Other receivables Inventory Prepaid expenses Other current assets ii) Current operating liabilities: sum of the following items Accounts payables Accrued expenses Current income taxes payable Unearned revenues, current Other current liabilities iii) Invested capital (IC) = Net PP&E + NOWC Net property, plant, and equipment (Net PP&E) Net operating working capital (NOWC)

d) For FY 2024 to 2028, compute return on invested capital (ROIC), defined as NOPAT/previous year's IC. Comment on projected values of ROIC.

In particular: i) How do they compare with historical ROICs? e) For FY 2024 to 2028, compute free cash flows to the firm (FCFF).