Now that we have forecasted our net income, with the exception of course of interest expense, let's move on to forecasting the cash flow available for debt repayment as well as the debt balances over the five year period.

So let's begin here on row 79 with net income, which we have up here at 347.8.

Now to get to cashflow, the first thing we need to do is add back D&A.

And now we wanna subtract two things, our CapEx spend, as well as our changes in working capital.

So for CapEx, we have 164 here in row 71.

And for working capital, we're going to do it in two steps.

Step one, we forecast the working capital balance, and then we calculate the change in working capital.

So up here in the assumptions we are provided with a percentage of sales assumption for working capital.

So let's take that 3% times the revenue or sales.

We can copy that to the right.

And now we have our working capital balance for 2025 and 2026.

We can then compute the change, but of course, we want any increases in working capital to lower our cash flow.

So I'm going to take last year's working capital minus this year's working capital to get negative 1.8.

Now we can calculate our forecast of cash flow available for debt repayment, we are going to take net income, we're gonna add D&A, we're going to subtract CapEx, and we're going to subtract our changes in working capital so we get a cash flow of 331.1.

Now we can use this value to build our senior and junior debt tranches and to forecast our outstanding debt.

So let's begin with our senior debt.

First, I need to get my initial senior debt balance, and I can get that from my sources of funds.

And that would be 1.8, 1.9 billion.

That's our starting point here.

And now we can build our year one forecast of senior debt.

So we take beginning balance equals last year's ending balance.

For the repayment, we're going to use our negative mean formula where we take the lower of our beginning balance and the cashflow available.

And that would be, in this case, negative 3 31. We add The two to get our forecast of our ending balance for year one.

Now the next line is interest expense, but we're going to skip that line for now and finish up our debt balances only.

So let's move on to our junior debt.

Again, we need to bring the initial balance from the sources of funds.

We can then link that up to our beginning balance of year one.

Again, we're going to use our negative mean formula between the beginning balance.

This time we're going to take the cashflow available and we're going to add it to any cashflow that was already used in paying down the senior debt.

And that gives us a repayment of zero because we have no money left to pay down our junior debt.

We're going to add this two to get the same balance of 8 0 7 0.8.

And the last thing we're going to do is we're gonna compete a very important metric, which is the debt repaid as a percentage of total debt.

Now we typically want about 50% of the debt to be repaid by year seven of the forecasts.

Now to compute this ratio debt repaid as a percentage of total debt, we're going to go back to 2025.

We're going to take one minus the ratio of our outstanding debt.

In this case, it would be the senior debt balance plus the junior debt balance.

And we're going to divide that by the initial loan amounts, which in this case will be the same.

But of course this ratio would change when we copy the formula to the right.

So again, let's take the senior debt balance.

This time we're going to lock that value and we're going to add the junior debt balance and lock that value.

That's going to give us, of course, 0% in 2025 since we don't start paying anything down until 2026.

Now let's copy this formula to the right and we can see that by the end of 2026, we'll have paid 12.3% of the total debt.