Modèles de Free Cash Flow

3. Compute the unlevered free cash flow and the interest tax shields from 2008 to 2012 based on estimates provided in Exhibit 1 and Exhibit 6. (3 points)

The UEFA FFP Regulations is about improving the financial health of European football club (UEFA, 2014). The regulation was implemented at the end of 2012 season where all clubs had to abide to the rules and regulations to obtain the license to play in the UEFA Champions League (UEFA, 2010). Deloitte (2014a, p. 2) refers the FFP break-even requirement as ‘a change potentially as profound as that brought about by the Bosman ruling.’

Ross, S. A., Westerfield, R. W., & Jordan, B. D. (Eds.). (2011). Essentials of corporate finance (7th ed., Rev.). New York, NY: McGraw-Hill Irwin.

in our calculations, as this company exhibited dramatic value differences to others in the sample, (likely to skew our results and prove misleading). Using the average of the revised sample field for each ratio, we inserted Torrington’s values where appropriate to generate an entity value. The findings generated two values for Torrington, 606 million and 398 million. Taking the average of these two numbers, Torrington exhibited a relative value of 502.41 million. Because of the lack of related information given in the case, and the often large differences in measures amongst competitors, different capital structures, internal management strategies, there remained many unknowns in our model. We decided it would be best to use this valuation to reaffirm our assumptions in our DCF valuation. (Please see exhibits)

FCF is calculated as:EBIT(1-Tax Rate) + Depreciation & Amortization - Change in Net Working Capital - Capital ExpenditureIt can also be

Discounted cash flow is a method that allows predicting an estimated projection of what might a stock’s value be in the present therefore show the attractiveness of an investment, this is done through the use of previous data relating a matter and computing details at hand into a formulae which give estimated projections . There are numerous distinctions as to what DCF could be used for, primarily it is used for deriving estimates of what you could get from a possible investment with consideration of time and money. DCF is a great tool at an entity’s disposal, yet it still holds a number of fault – the smallest change of computed date could result in complete inadequacy in the result.

The free cash flow method is used to gauge “a company’s cash flow beyond that necessary to grow at the current rate… [to ensure companies] make capital expenditures to continue to exist and to grow” (Drake, n.d.). Calculation of free cash flows utilizes various components, including a firm’s value, cash flow forecasts, a firm’s capital structure, the cost of capital, and/or discounted cash flows.

Most extreme discussion of financial planning midpoints on an economic point of view the costs and payment that happen yearly. Similarly, the impressive thought has been focused on strategic money related association methodology, for example, long haul commercial readiness and need-based arranging. A necessary discernment is especially critical all through times of uncertainty the recurrence and execution of wages and costs all through the method for the year. In the present air, individual officers can hardly wait until the end of the year to get an exact picture of money related circumstance, and the uneven profundities of the spending need consistent advancement changes. The ability to make these appropriate changes shields against making more draconian adjustments along ways ahead (Markgraf. 2009).

Parrino, R., Kidwell, D.S., & Bates, T. W. (2012). Fundamentals of Corporate Finance (2nd ed).

impact the cash position at the end of definite periods. The balance at the end of periods will show whether there is sufficient cash to carry out planned activities, and if not how much is to be borrowed and what will be the interest payment schedule and how that will impact subsequent balances and also how much needs to be acquired through sale of securities in case of expansion program. Cash budget also shows whether fund is lying idle which needs to be invested in profitable channels. Thus convergence of cash budget and organisational plans, goals, and strategies can be made possible by aligning available cash and acquisition of additional fund with the capital expenditure requirement (Brownell 1981).

It provides an estimation of the company’s total value, based on its free cash flows (FCFs) to the firm discounted at the weighted average cost of capital (WACC). The FCFs of the firm are the cash flows from operations available to all capital providers, net of the required capital investments necessary to maintain the company as a going concern. The WACC reflects the hurdle rate that providers of capital require; based on the risk they face from investing in the company. The equity value per share—that is, the value accruing to the common (or voting) shareholders—is given by the operating value of the company minus the value of any claims on the company’s cash flows by debt holders, preferred shareholders, non controlling (minority) interest shareholders, and any contingent

Cash flow forecasting sets out anticipated inflows and outflows of cash in the coming months of trading. Cash flow can be described as the movement of money through the business and it is one of the most important aspects of financial management to keep the business solvent and trading. It is possible for a company to be cash rich but not generating any profit and also for a profitable business to have no cash and be unable to pay its creditors. There are two main ways to avoid cash flow problems; Speed up cash inflows and delay cash outflows. (Marcousʹe, 2003) Cash flow forecasting is different from the cash flow statement, whereas the cash flow statement shows what has happened in the past i.e historical data the cash flow forecast is based on an estimate of future cash flow. By creating a detailed estimate of the inflows and outflows expected in the next period the company can derive the cash flow forecast and by calculating each month’s figures the cumulative cash position can be assessed. This gives the company an idea of any times that they may face a negative cash flow balance and arrangements can be made to make sure extra finance is available in this period. (Lines and Marcousʹe et al., 1996)

The diagram above provides key cash flow figures of SeaDrill Limited. In the period of 2013-2014, firm’s cash flow from operating activities has decreased from USD 1695 million to USD 1574 million. In 2014, net cash flow from financing activities was equal to USD -1521 million, while in 2013 it was equal to USD 1695 million. From the diagram, it can be clearly seen that the firm has been investing very aggressively in new fleet. The firm had negative free cash flow for the last 5 years. As the slope of FCF line and CAPEX line have replicating slopes, it can be concluded that negative cash flow was caused by large CAPEX spending rather than fluctuations in operating cash flow. A particularly large spending has been done in 2013, when day rates and utilisation were high and industry growth forecast was bright. Since 2013, there is a clear evidence of trend reversal. The firm has drastically decreased investment spending and start divesting firms assets via

To evaluate the undistributed profits and reserves, retained earnings, profits, and their authentication whether an adequate capital are generated through this channel or not.

Presented in Partial Fulfillment of the Requirements for the Degree of Master of Science (Accounting and Finance)