Assume a company is formed with $100 of equity capital, all of which is immediately invested in working capital. Assumptions are as follows:
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Dividends
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Nondividend-Paying
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First-year sales
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$100
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Sales growth
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10% per year
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Cost of goods sold/Sales
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20%
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Operating expense/Sales
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70%
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Interest income rate
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5%
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Tax rate
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30%
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Working capital as percent of sales
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90%
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Based on this information, forecast the company's net income and cash flow for five years.