Assignment 10 [PDF]

Zitiervorschau

ASSIGNMENT 10 1. Is cash flow analysis important for valuing firms. 2. GAAP cash flow statements treat interest capitalized during construction as investment in plant.

Do you agree with this practice? 3. Why might an analyst not put much weight on a firm's current free cash flow as an indication of

future free cash flow? 4. Explain why very profitable firms sometimes have negative free cash flows. 5. A firm reported comprehensive income of$376 million for 2012, consisting of $500 million in

operating income (after tax) less $124 million of net financial expense (after tax). It also reported the following comparative balance sheet (in mill ions of dollars):

Operating cash

2012 60

Short-term 550 investments (at market) Accounts receivable

940

Balance Sheet 2011 50 Accounts payable 500 Accrued liabilities

790

Inventory 910 Property and 2,840 plant

840 2,710

5,300

4,890

2012 1,200

2011 1,040

390

450

Long-term debt

1,840

1,970

Common equity

1,870

1,430

5,300

4,890

Calculate free cash flow using Method 1 and Method 2. 6. The following information is from the financial report of a pure equity company (one with no net

debt). In millions of dollars. Common shareholders' equity, December 31, 2011 Common dividends, paid December 2012 Issue of common shares on December 31, 2012 Common shareholders' equity, December 31, 2012

174.8 8.3 34.4 226.2

The firm had no share repurchases during 2012. Calculate the firm's free cash flow for 2012.

7. The following information is for a firm that has net debt on its balance sheet (in millions of dollars).

Common shareholders' equity, December 31, 2011 Common dividends, paid December 2012 Issue of common shares, December 2012 Common shareholders' equity, December 31 , 2012 Net debt, December 31, 2011 Net debt, December 3 1, 2012

174.8 8.3 34.4 226.2 54.3 37.4

There were no share repurchases during 2012. The firm reported net interest after tax of $4 million on its income statement for 2012, and this interest was paid in cash. Calculate the firm's free cash flow for 2012. Instructions: a. Answer this question in groups with word & ppt format. b. Submit this assignment (soft copy only) via email by only the team leader group to: [email protected] c. Subject email: ex: Group 1 Assignment 1; Group 2 Assignment 1; etc. d. Submit deadline: March 30th 2019 at 11.59 p.m.

Thank you and good luck!