Question

2. Hollinger Corporation is contemplating the introduction of a new product. You gather the following data from pro forma income statements and balance sheets Year 1 Year 2 Sales Cost of Goods Sold Sell, General, & Admin Depreciation Earnings Before Tax Income Tax Expense Net Income 24,000 16,000 2,500 1,000 4,500 1,500 3,000 22,500. 15,500 2,000 1,000 4,000 1,300 2,700 Accounts Receivable Accounts Payable 2,400 1,333 2,250. 1,292 Throughout the life of the project, Hollinger's debt/equity ratio will be 0.75, there is no significant amount of inventory, and there is no incremental capital expenditure expected during these years.. During year 2 of the project, what is the unlevered free cashflow (UFCF2)?. t 2

Answer 1

		Year 2
Sales		$22,500
Cost of goods sold		$15,500
Sell, general and Admin		$2,000
Operating income		$5,000
Depreciation		$1,000
Earning before tax		$4,000
Tax		$1,300
Net Income		$2,700
UFCF		$3,700

UFCF = Operating income - taxes