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JT Inc Following is the seven-year forecast for a new venture called JT Inc: (all...

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Finance

JT Inc

Following is the seven-year forecast for a new venture called JT Inc: (all amounts in $000)

2020 2021 2022 2023 2024 2025 2026
EBIT $(1000) $(900) $200 $1,200 $2,500 $3000 $3,050
Capital Expenditures $550 $350 $200 $175 $175 $160 $150
Changes in Working Capital $400 $300 $200 $100 $100 ($100) ($100)
Depreciation $40 $80 $125 $150 $150 $150 $150

Beginning after year 2026 the annual growth in EBIT is expected to be 1.5%, a rate that is projected to be constant over JT Inc remaining life as an enterprise. Beginning in 2026 JT Inc capital expenditures and depreciation are expected to offset each other (capex - depreciation = 0) and year to year changes in working capital are expected to be zero (working capital levels remain constant year over year). For discounting purposes consider 2020 as year 1.

Assume a tax rate is 21% and a cost of capital of 7.75%

Determine the NPV of JT Inc Free Cash Flow for the years 2020 -2026. HINT: Remember to account for loss carry-forwards when determining income taxes.

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