In the Table Below Is Selected Information for Sprigue Company

question 53

Essay

In the table below is selected information for Sprigue Company.

All figures are in thousands and represent expectations of the future. $$\begin{array} { l r l r r r } \text { Year } & 2005 & 2006 & 2007 & 2008 & 2009 \\\text { Net income } & \$ 5,175 & \$ 6,210 & \$ 7,462 & \$ 8,570 & \$ 8,998 \\\text { Dividends } & 773 & 932 & 1,118 & 1,285 & 2,250 \\\text { Depreciation } & 621 & 702 & 793 & 896 & 1,013 \\\text { Increase in working capital } & 675 & 1,035 & 1,242 & 1,118 & 428 \\\text { Capital expenditures } & 5,625 & 8,625 & 10,350 & 9,315 & 3,571 \\\text { New debt issued } & 900 & 4,500 & 5,500 & 3,900 & 0 \\\text { Old debt retired } & 987 & 750 & 990 & 2,000 & 2,000 \\\text { New equity issued } & 1,823 & 0 & 0 & 0 & 0\end{array}$$
a. Calculate the expected free cash flow to equity for the years 2005 to 2009.
b. Explain the expected changes in debt levels over the five years.

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