the cost of equity is 20%, and the cost of debt is 7.5%. The corporate tax rate is 25%. Investment takes place today, that is at year 0, and equals 30. The firm has hired a group of consultants who prepared the projections in the table below. The costs of their services are 4 and will be paid next year. Assume there are no changes in working capital.

Year 1 2 3 4 5
EBIT 10 12 14 16 18
Interests 0.5 0.5 1 1 1.5
Depreciation 2.5 2.5 2.5 2.5 2.5

What are the free cash flows for year 1?

Select one:
a. 6.00
b. 5.00
c. 0.50
d. 10.00

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