The Cash Flow Of The Free Cash Flows ( Fcf )
As shown in Exhibit 4, in order to value a company we first started by calculating the free cash flows (FCF) year by year. In order to do so, we decided to use the forecasted revenue numbers from Capital IQ and calculate all the other metrics by using the trends we saw in last three years (Exhibit 3). The company can allocate free cash flow in several ways, including but not limited to: repurchasing stock, reinvesting for growth and paying out dividends.
After calculating the free cash flows, we had to calculate the terminal value of the company. Doing so required us to estimate a terminal growth rate. We decided that 3.1% growth rate was suitable for KimberlyClark. This rate was integrated by 2% expected inflation growth per year in the US (Federal Reserve), in addition with a 1.1% expected growth of the population (World O Meters). As a team we believe that since KMB is in a personal care industry, it can be perceived as a commodity, thus the population growth should directly affect our sales. Necessary goods will still have relevance in the future.
After terminal value was calculated, we proceeded by valuing KMB using the entity approach. As shown in the Exhibit 5, the value of the assets is $55,128.44. This was calculated by discounting all the unlevered cash flows and the terminal value by our WACC of 6.8257%. For the total value of debt we used the market value of $7064.3 million. After the value of the equity was calculated, we got the implied debt…

Free Cash Flow for Starbucks
613 Words  2 Pagescondition to McDonald's. The formula for free cash flow can be found at Investopedia (2012). The free cash flow for Starbucks is $1.8 billion and for McDonalds it is $9.964 billion. Starbucks has a healthy cash position, but saw its cash flow from operations decline last year, which is not an encouraging sign. McDonalds also has ample cash on its balance sheet, and saw its cash flow from operations increase significantly last year. With respect to cash flow, McDonalds appears be the better of the…

Free Cash Flow
1481 Words  6 PagesFree cash flow In corporate finance, free cash flow (FCF) is cash flow available for distribution among all the securities holders of an organization. They include equity holders, debt holders, preferred stock holders, convertible security holders, and so on. G. Bennett Stewart  the "economic model of value holds that share prices are determined by just two things: the cash to be generated over the lifetime of a business and the risk of the cash receipts”. GSB (1990), “The Quest for Value”…

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1835 Words  8 Pagesto Note on Sample Cash Flow Template. Question 1 (5 points) The project with the highest IRR is always the project with the highest NPV. Your Answer   Score  Explanation  True     False  ✔  5.00  Correct. Try now to sort this out in different contexts,  Total   5.00 / 5.00   Question Explanation This is all about the fundamental difference between IRR and NPV. Question 2 (10 points) Ann Arbor is considering offering public bus service for free. Setting up the…

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4141 Words  17 Pages2. Valuation of AD and expected return: Free Cash Flow Method To value AD we use the Free Cash Flow Method. To calculate the free cash flow streams in the future, we need to use the financial statements of AD. To look what AD will do in the future, we have to make assumptions. A part of these assumptions can be found in exhibit 18 of the case description. To derive the free cash flow for AD, we used the following computation of the free cash flow: Net income + Depreciation / amortization…

Balance Sheet and Free Cash Flows
1155 Words  5 PagesBrocoum Courtney Delia Stephanie Doherty David Dubois Radu Oprea December 19th, 2009 Contents Objectives 1 Management Summary 1 Financial Health 1 Financial Forecast for 2002 and 2003 3 Key Driver Assumptions 5 Star River WACC 5 Free Cash Flows of the Packaging Machine Investment 7 Appendices 7 i. Objectives This report seeks to answer the following five questions about Star River Electronics Ltd.: 1. Assess the current financial health and recent financial performance…

Analyzing The Statement Of Cash Flows The Cash Flow Statement
1906 Words  8 PagesThe use and purpose of the Statement of Cash Flows The cash flow statement identify the sources of cash flowing into the business and shows how they have been used over a period. Companies or users need to read this statement in conjunction with trading and profit and loss accounting and balance sheet and also in the context of the statement in the previous year. (Cox, 2004) This statement provides a useful tool for analysing management decisions and strategy. It can reveal such things as the amount…

Cash Flow and Risk Free Asset Essay
625 Words  3 Pagesso. (10 points) This strategy does not consider risk. 3. The NuPress Valet Company has an improved version of its hotel stand. The investment cost is expected to be 72 million dollars and will return 13.50 million dollars for 5 years in net cash flows. The ratio of debt to equity is 1 to 1. The cost of equity is 13%, the cost of debt is 9%, and the tax rate is 34%. What is the NPV of the project? (10 points) WACC = .5*13+.5*9*(1.34) = 9.47% PMT = 13,500,000, i=9.47%, n=5, PV = ?; NPV =…

Free Cash Flow and Corporate Valuation Model
1510 Words  7 PagesAssignment Chapter 15 True/False Indicate whether the statement is true or false. _F___ 1. The corporate valuation model cannot be used unless a company doesn 't pay dividends. _T___ 2. Free cash flows should be discounted at the firm 's weighted average cost of capital to find the value of its operations. _F___ 3. Valuebased management focuses on sales growth, profitability, capital requirements, the weighted average cost of capital, and the dividend growth rate. _F___ 4…

Free Cash Flow and Total Value
1218 Words  5 Pagescombination of WACC and APV methods. As stated above, ACC will use the Leverage buy out (LBO) approach, which means that the debt to equity ratio of AirThread will not be the same from 2008 to 2012, so APV approach would be more suitable to valuate the cash flows between 2008 and 2012. After 2012, AirThread will delever to industry norm and thus, they will have a target leverage ratio; therefore WACC is best to estimate the terminal value. Finally, regarding the valuation of nonoperating investments…

Cash Flow
7360 Words  30 PagesStatement of Cash Flows Learning Objectives 1. Identify the purposes of the statement of cash flows 2. Classify activities affecting cash as operating, investing, or financing activities 3. Compute and interpret cash flows from financing activities 4. Compute and interpret cash flows from investing activities 5. Use the direct method to calculate cash flows from operations 6. Use the indirect method to explain the difference between net income and net cash provided…
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