399 words - 2 pages
December 7, 2013
Cash flow statements are important for every business. Cash flow statements tell investors, banks, and the company’s management what is going on with the company’s cash. Investors want to know if a company can and if they have paid dividends and a cash flow statement can provide this kind of information. When banks look at giving a loan to a company they look at a lot of different statements and on of them is the cash flow statement. From a cash flow statement banks can determine if a company is handling there cash intake and out flow correctly. A cash flow statement can also show if a company is doing something shady with their money or
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Little Bit Inc.
Statement of Cash Flows
For Year Ended December 31, 2009
Cash flow from operating activities:
Net income $ 5,500
Non-cash expenses included in net income:
Depreciation $ 18,000
Deferred income taxes 500
Cash provided by (used for) current assets and liabilities:
Accounts Receivable $ 6,500
Prepaid expenses 4,000
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facilities to the member.
The cash flow covers the area of study about current assets and current liabilities of a financial institution. Generally, cash flow refers to the arrangement of cash inflows and cash outflows of every co - operative institutions. Cash flow makes proper planning of cash budgeting over the institution. In order to achieve the efficiency of cash flow, the financial manager should improve cash flow techniques. For this, the main techniques of cash flow are to accelrate cash collection and to decelerate cash disbrusement as far as possible. For this, the customers are to encouraged to pay promptly offering cash discount, systematic billing system and notifying the
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A. Briefly state how the Income Statement is different from the Cash Flow Statement. Give examples of decisions that can be made from the information provided by each of these statements?
-The income statement shows how much revenue a company has earned over a period of time, which is usually for a year. The income statement also reports the costs and expenses associated with earning the revenue. At the bottom of the income statement it shows the net inome, which shows the actual earnings after expenses, taxes, etc are taken out. This can be a net profit or net loss, depending on how the company performed that year. The cash flow statement reports a company’s inflows
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provided by operating activities over the period 2005 to 2007? Explain why the change in accounts payable and in accrued and other liabilities is added to net income to arrive at net cash provided by operating activities. (e) Compute P&G's (1) current cash debt coverage ratio, (2) cash debt coverage ratio, and (3) free cash flow for 2007. What do these ratios indicate about P&G's financial condition?
(a) P&G could use the account form or report form. P&G uses the account form.
(b) The techniques of disclosing pertinent information include (1) parenthetical explanations, (2) notes, (3) cross-reference and contra items, and (4) supporting schedules. P&G uses parenthetical explanations
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$45,000 were declared and paid.
3. Bonds payable amounting to $50,000 were redeemed for cash $50,000.
4. Common stock was issued for $42,000 cash.
5. No equipment was sold during 2011, but land was sold at cost.
Complete the statement of cash flows for 2011 using the indirect method. (List amounts from largest positive to smallest positive followed by most negative to least negative, e.g. 15, 14, 10, -17, -5, -1. If amount decreases cash flow, use either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)
TAGUCHI COMPANY |
Statement of Cash Flows |
For the Year Ended December 31, 2011 |
Cash flows from
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firm’s shareholders tender their shares, then the merger will be completed over management’s objection.
A hostile merger often begins with a preemptive bid. The idea is to offer such a high premium over the pre-announcement price that no other bidders will be willing to compete, and the target company’s board cannot reject the bid.
3. Complete CCI’s cash flow statements for 1996 through 1999. Why is interest expense typically deducted in merger cash flow statements, whereas it is not normally deducted in capital budgeting cash flow analysis? Why are retained earnings deducted to obtain the free cash flows?
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standing compared to where it envisions being.
3) Analytical capabilities of SAP’s HANA which processes years’ worth of data in a matter of seconds will also be an integral part of the finance role. Maintaining cash flow is essential to keep the organization functioning on a daily basis. Data analytics can be used to conduct “Variance Analysis” which is a comparison of projected cash flow against actual cash flow. Such a comparison over different periods gives a financial analyst vital insight about cash flow requirements and helps him better anticipate times when greater cash flow is needed, for example purchasing bulk material, handing out bonuses.
4) i-Views containing SAP services will assist the financial analyst to view detailed reports before they are published. Access to these reports helps the analyst ensure that all financial reports comply with government laws.
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TO: Go With the Flow Inc.
FROM: Olivia Bogle, Laura Cox, J.T. Mack, and Erica Patterson
RE: Statement of Cash Flows
Go With the Flow Inc. (Go With the Flow) designs, manufactures, and sells a large variety of mobile network and communication products. The company’s communication devices include mobile, cordless, and corded telephones. Go With the Flow’s liquidity primarily comes from the company’s cash flows, debt and revolving credit facilities, and the sale of trade accounts receivables. Three of the company’s cash flow transactions are insurance settlement proceeds, sale of accounts receivable, and acquisition of property, plant, and equipment on account. This
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2011 CF forecast for LL requested by bank (Finance)
Our 2011 cash flow forecast assumes that the union will accept LL’s revised offer in June and the strike was only for April, 2010 which will not affect fiscal 2011 since the offer would be retroactive to April 30, 2010. Our forecast also assumes that MRL’s cash flows are excluded.
Our calculations are in APPENDIX. It shows that cash flow for 2011 is forecasted to be $8,646,000. Furthermore, cash flow is expected to decrease steadily in 2012 and beyond. It is doubtful that LL can remain as a going concern.
Our calculations are based on Mark’s assumptions about sales and operating costs reverting back to 2009 levels, as well as
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effective rate that is of the same periodicity as the cash flows. For example, if we have quarterly cash flows with monthly compounding, we would typically convert the monthly rate into an effective quarterly rate to solve the problem.
This is the interest rate that is used to convert between future values and present values. Note that the process of calculating present values is often referred to as “discounting” because present values are generally less than future values.
Frequency of Cash Flows
When using the cash flow functions, many financial calculators prompt you for both the cash flow (CFx) and then the frequency (Fx or #Times). The frequency is simple a shortcut to
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Chapter 5: Statement of Cash Flows
Objectives of the SCF
•Companies are required to include statement of cash flows (SCF) as part of their F/S.
•Historical CF are often used as indicator of amount, timing, and uncertainty of future CF.
•The objective of the SCF is to disclose the historical cash flows of the enterprise during the reporting period for both feedback and predictive purposes.
Classification and Organization
The SCF is classified on the basis of the type of cash flow:
•Operating activities are the principal revenue-producing activities of the enterprise and the related expenditures.
* Cash inflow from operations is measured as cash
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• Cash flow statement - Total cash flow statements remain unaffected by operating and capital leases. That said, cash flow from operations will include only the interest portion of the capital-lease expense. The principal payment will be included as a cash outflow from cash flow from financing activities. As a result, capital leases will overstate CFO and understate CFF.
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March 08, 2014
Professor Charlie Merritt
Argosy wheel industries are considering a three year expansion project. The Schilling Group is hired to evaluate the progression which involves long term opportunities for investment. We will provide a comprehensive report that outlines and illustrates several techniques that will show and evaluate capital projects, methods used for project selection, weighted average cost to the firm and the cash flow that is anticipated for the project. We will also incorporate the risk into the calculations from two projects. In this report we explain our findings
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business builder 5
how to prepare a cash budget
zions business resource center
zions business resource center
how to prepare a cash budget
At its most basic level, a budget is a plan for owners and managers to achieve their goals for the company during a specific time period. In this business builder you will learn the fundamental concepts of cash budgets and how to evaluate your budget on a month-to-month basis.
What You Should Know Before Getting Started
• The Purpose of a Cash Budget • Why Prepare a Cash Budget?
How to Create a Cash Budget
• Time Period • Desired Cash Position • Estimated Sales and Expenses • Cash Flow Budget Worksheet
6 6 6 9
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Long-Term Financing Paper
For a publicly traded company, shareholder value is the part of its capitalization that is equity as opposed to long-term debt. In the case of only one type of stock, this would roughly be the number of outstanding shares times current share price. Things like dividends augment shareholder value while issuing of shares (stock options) lower it. This Shareholder value added should be compared to average/required increase in value, also known as cost of capital. For a privately held company, the value of the firm after debt must be estimated using one of several valuation methods, such as discounted cash flow or others. Discounted Cash Flow (DCF) is used to
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Net Cash Flow = Net Income + Depreciation and Amortization
Net Working Capital => you have to remember!
NOPAT= EBIT (1-t)
OCF = EBIT (1-t) + Depreciation
FCF = EBIT(1-t) + Depreciation - Capital expenditures - Changes in Net Working Capital
CF to investors (CF from assets=FCF) = -CF from financing activities + interest
Cash flow to creditors = interest + retirement of debt – new debt issues =
= interest – Δ LT debt – Δ ST debt – ΔCurrent maturities of LTD
Cash flow to shareholders = dividends + repurchase of stock – new equity issues =
= -ΔStockholders’ equity + Net Income
Current Ratio = CA/ CL
Quick Ratio => you have to remember!
Debt ratio = TL/TA
D/E = TD/TE
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SKS Manufacturing has recently hired Deloitte & Touche as they are in a critical cash position with various internal inefficiencies in their procurement and production processes. Deloitte & Touche and SKS Manufacturing will need to work together in order to solve the issues present at SKS Manufacturing so they can be successful within the automotive parts industry.
Issues & Analysis
There are three key issues that are present at SKS Manufacturing that need to be systematically tackled in order for stabilization of the business to occur and the long-term redesigning process to be effective. The key issues facing SKS Manufacturing are: (1) cash flow shortage (2) weak
1092 words - 5 pages
January 30, 2013
Decisions are made daily by company management, lenders, and shareholders. To make informed, intelligent business decisions, there are several strategies that are used by each of the fore mentioned entities. When deciding if investing is the right choice, if a company will be able to repay a loan, or what needs to happen to make a company more efficient, the best way to get an inside look at the company and the information needed, would be to look at the financial statements. By looking at the income statement, balance sheet, and the statement of cash flow, the financial health of the company can be discovered.
A shareholder or potential
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Pixonix was based in Canada - its revenues were denominated in Canadian dollars while a significant portion of its expenses were to be paid in USD. Thus, Pixonix had to convert its Canadian dollar cash flows into US dollars annually. Canadian dollar was strengthening and cash flow and profitability had been impacted positively. Cain was in a dilemma about what would happen to the value of CAD at the end of January when the company has to pay USD 7.5 million for licensing proprietary tools and software through a US company. In other words, she was worried about the effect the volatility in CAD would have on the company’s cash flows.
Pixonix should hedge its USD position. In case if
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CONSOLIDATED CASH FLOW STATEMENT
for the year ended 30 June 2010
Cash flow from operating activities: Interest Received Interest Paid Dividend Received Fees & Commissions Received Cash Paid to Employees Cash Paid to Suppliers Cash Received from other operating activities Cash Paid for other operating activities Cash Flow before changes in Operating Assets & Liabilities Changes in Operating Assets & Liabilities: Increase/Decrease in Loans & Advances Increase/Decrease in Investment in other Institutions Increase/Decrease in other Assets Increase/Decrease in Deposit Received from other Banks Increase/Decrease in Deposit received from Other Depositors Increase/Decrease in Long Term Debt
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, that shows us how important the incremental cash flow is and that interests the company. These incremental cash flows are the marginal benefits from the project and since the firm accepts the project they are the increased value to the firm.
2. What are the incremental cash flows for the project in years 1 through 5 and how do these cash flows differ from accounting profits or earnings?
Incremental Cash Flows for Caledonia years 1 to 5
1YR 2YR 3YR 4YR 5YR
21,000,000 36,000,000 42,000,000 24,000,000 15,600,000 Project Revenue
200,000 200,000 200,000 200,000 200,000 Minus fixed expenses
12,600,000 21,600,000 25,200,000
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The NPV and IRR methods would in certain situations give the same accept-reject decision. But they may differ in the sense that the choice of an asset under certain circumstances may be mutually contradictory. The two methods would give consistent results in terms of acceptance or rejection of investment proposals in certain situations such as conventional investments or independent proposals. A conventional investment is one in which the cash flow pattern is such that an initial investment is followed by a series of cash inflows. Thus, in the case of such investments, cash outflows are confined to the initial period. The independent proposals refer to investments the acceptance of which
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The four basic financial statements are the balance sheet, income statement, statement of cash flow, and the statement of retained earnings. The balance sheet depicts the current financial circumstances of the company. This reports the company’s assets, liabilities, and net equity as of a given point in time. The income statement reports the company’s cost and revenues. This reports the company’s income, expenses, and profits over a period of time. The statement of cash flow describes the changes is cash and cash equivalents. This reports the company’s activities, such as its operating, investing, and financing costs. The statement of retained earnings
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After careful cash flow analysis and a discount rate (WACC) of 9%, commissioning a capsize carrier for 25 years is the only appropriate option for our firm. However, if the discount were instead 10%, both options would fail the NPV test by yielding negative results. I make this recommendation after thorough analysis of estimated cash flow and with the desire that our required 15-year life span will be amended.
With the expected 9% discount rate, commissioning a capsize carrier for 15 years and then scrapping it as is company policy would ultimately yield a NPV of (1,252,916). However, if Ocean Carriers decided to commission its ship for 25 years, then the NPV would be a positive 368,557
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Cash Flow Statement
Cash Flow from Operating Activities: Cash Collection from Customers Cash Payment for Cost and Expenses Cash Generated from Operations Interest paid Net Cash Generated from Operations Cash Flow from Investing Activities: Purchase of Land Construction of Factory Building Purchase of Plant & Machinery Purchase of Electrical & Office Equipment Refund of Advance Net Cash Used in Investing Activities Cash Flow from Financing Activities: Short Term Loan - Cash Credit Long Term Loan Received Long Term Loan Repayment (Current Portion) Payment of Dividend Net Cash Generated from Financing Activities Net Increase/(Decrease) in Cash and Cash Equivalent Cash and Cash
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interested in these cash flows on after tax basis only as these are the flows which are available to the shareholder.
Second, it is only the incremental cash flows which interest the company by looking at the project from the point of the company as a whole; the incremental cash flows are the marginal benefits from the project and are the increased value to the firm of accepting the project. Depreciation is not a cash flow term; it does affect the level of the differential cash flows over the project’s life because of its effect on taxes. Depreciation which is an express item and the more depreciation incurred, the larger are expenses. The accounting profits become lower and in turn, so
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i. Net cash used for financing activities SCF
j. Accounts payable BS
k. Common stock BS
l. Interest revenue IS
m. Long-term debt BS
n. Increase or decrease in cash SCF
(15-20 min.) S 1-15
a. Paying large dividends will cause retained earnings to be low.
b. Heavy investing activity and paying off debts can result in a cash shortage even if net income has been high.
c. The single best source of cash for a business is collections from customers. This source of cash is best because it results from the core operations of the business.
d. Borrowing, issuing stock, and selling land, buildings, and equipment can bring in cash even when the company has experienced losses. Reducing accounts receivable and inventory can also increase cash flow.
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outcome for Davanrik should LAB licenses off to Merck, Also, the analysis will determine if Merck should license the drug and for how much, and to determine how much LAB would receive given a 5% royalty fee on any cash flow. Lastly, the paper will analyze the change in launching Davanrik for weight loss if the cost was $225 million instead of $100 million.
Merck is a giant pharmaceutical company that concentrates on research and development of new drugs. It performs several research and develops medical products for humans and animals. Merck owns lots of blockbuster medical supplies and drugs. In 1999, it earned $5.9 billion in sales, an increase of about 20% from 1998 (Ruback, 2003). Merck
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staying constant in the years coming; by dividing the initial investment by the annual incremental operating cash flow (Eldenburg, PhD & Wolcott PhD, CPA, CMA, 2011). While this method is simple by nature, it also works better in partnership with either NPV or IRR to identify risks to the business.
Best use for the Different Capital Budget Techniques-Ken
To begin the analysis of the two options, a closer look at the data was necessary. Errors committed by the previous accountant were corrected, and several assumptions were also made to ensure the data was realistic. A list of corrections and assumptions is included on the attached data sheet.
Based on the assumptions, and the data
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Quick ratio 0.37 0.67
Net working capital, NWC 316,798 155,461
Net liquid balance, NLB 5,773 -11,399
Working capital requirements, WCR 311,025 166,860
WCR/Sales 0.40 0.35 (similar
Cash flow from operations -82,070 -26,384 to W.T.
Cash conversion period 250.63 214.22 Grant
Days inventory held, DIH 322.69 268.88 CCP in
Days sales outstanding, DSO 8.89 12.08 the early
Days payables outstanding, DPO 80.95 66.74 70's)
Current liquidity index 0.0045
Total assets / total sales, A/S 0.8897
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Top of Form
These are the automatically computed results of your exam. Grades for essay questions, and comments from your instructor, are in the "Details" section below. | Date Taken: | 10/14/2013 |
Time Spent: | 03 min , 40 secs |
Points Received: | 18 / 30 (60%) |
Question Type: | # Of Questions: | # Correct: |
Multiple Choice | 5 | 3 |
Grade Details - All Questions |
1. | Question : | You work for Athens Inc. and you must estimate the Year 1 operating cash flow for a project with the following data. What is the Year 1 operating cash flow? Sales revenues: $15,000
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present value of future cash flow. However it is not appropriate to say that there is consistent growth on the revenue of CGU, the values of capital expenditure that they get in calculating future cash flow are also not appropriate.
- In accordance with IAS36-33 (a), in measuring value in use an entity shall base cash flow projections on reasonable and supportable assumptions that represent management’s best estimate of the range of economic conditions that will exist over the remaining useful life of the asset. Greater weight shall be given to external evidence. And based on IAS36-33 (c), “this growth rate shall not exceed the long-term average growth rate for the products, industries, or
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used to locate the factor from the present value table that will be multiplied by the cash flow to determine the present value of that cash flow. The present values of all of the cash flows will then be compared to the total investment to determine if it is an acceptable investment. If the present value is equal to or greater than the total investment, then the investment will likely be accepted. If the present value is less than the total investment, the investment should not be accepted.
Cost of capital is used in the internal rate of return analysis by comparing the internal rate of return calculation to the cost of capital calculation. If the internal rate of return figure is equal to or greater than the cost of capital figure, then the investment is acceptable. If the internal rate of return figure is less than the cost of capital figure, then the investment is not acceptable, because its return will be less than what it costs to make the investment.
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suggestion of leasing the company under receivership. The best decision will be reached not by appreciating the proximity of the new location as Taylor seems to suggest but by estimating the net cash inflow as applied in capital budgeting.Net cash flow will be the difference gotten between periodic inflows of cash and the outflows for the proposed project. No mention of the implications of tax shield using the current straight line depreciation. The tax shield in our case of $ 5,000 per year would reflect an amont of tax saving worth $2,000 (40 % x $ 5,000).The arguments behind buying a new equipment worth $100,000 does not stop with the cost. Replacement decisions should also consider factors such
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-Cash flows from owning a share of stock come in the form of future dividends
-Share of common stock with a constant dividend
-dividend grows at a steady rate
-Dividend growth model
-model that determines the current price of a stock by its dividend next period divided by discount rate minus the dividend growth rate
-If the growth rate is bigger than the discount rate, then the present value of the dividend gets bigger and bigger
-allows for supernormal growth rates over some finite length of time
-stocks expected cash dividend divided by its current price.
-similar to current yield on a bond
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put the cash to use again - ideally, to reinvest and make more sales. The DSO can be used to determine whether a company is trying to disguise weak sales, or is generally being ineffective at bringing money in. For most businesses, DSO is looked at either quarterly or annually.
DAYS PAYABLE OUTSTANDING-Days payable outstanding tells how long it takes a company to pay its invoices from trade creditors, such as suppliers.
Companies must strike a delicate balance with DPO. The longer they take to pay their creditors, the more money the company has on hand, which is good for working capital and free cash flow. But if the company takes too long to pay its creditors, the creditors will be
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earned, not when cash is received. This way of accounting is called accrual basis accounting
Introduction to Financial Statements
The piece of information send to investors to analyze the condition of business Balance Sheet
Describes where the enterprise stands at a specific date.
Describes results of company`s operations ( income and expenses and as a result profit n loss ) for a particular period of time.
Cash flow statement
Describes how cash position of a company changed over a particular period of time.
The balance sheet reports the assets, liabilities, and shareholder equity of the company. It is constructed
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WHEN TO ISSUE THE NONVOTING CLASS A STOCK
MLCM believed that market condition would deteriorate further during the week of October 5, and strongly recommended that Spiegel price the Class A shares in the next 48 hours or postpone the offering indefinitely. Now whether MLCM was right or not it will be judged by real option valuation. We showed the decision analysis by using both the FCF and the net cash flow. We have used three options such as a. Timing option, b. Decision Tree Analysis, and c. Option to Wait (Black Scholes Model).
|1. Timing Option |
We have used Timing Option to calculate the NPV if the stocks were issued immediately. Here we consider FCF in
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There are two main ways to estimate the value of firm. One is absolute valuation method which including free cash flow to equity method( FCFE ) and free cash flow to firm method( FCFF ). Another one is relative valuation method which uses relative valuation techniques such as price earing ratio( P/E) and EBITDA multiple. In this case, FCFF has been used to estimate the value of the firm.
In this case, the financial data from Southwset Airlines has been used to estimate the weighted average cost of capital( WACC ) of JetBlue Airways. This mainly becasue Southwset Airlines belongs to low-fare airlines just as JetBlue Airways, and it has the longest history and grows stably
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Eg. if you plan to launch a new mobile phone, your opportunity estimate could look like
There are around 30 million mobile phone subscribers in Australia
Customers in year 1: 0.5% x 30,000,000 = 150,000 customers
Price per mobile sold: $390
Estimated revenue in year 1: $390 x 150,000 customers = $58,500,000
Note: You should use the sizing of your revenue opportunity to develop your budget
(see 3 below).
3. Cash Budget
Your cash flow is the money you have coming in from revenue and going out for expenses.
Good cash flow management will ensure you always have money available to pay your expenses
when they are due.
Use this analysis to develop the
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affected, which is the last thing he would like to see.
For all the concerns above, it is very likely that the owner will make cash injection if the Preem fails to issue bond.
What I want to mention in the last is, there are still several uncertainties that may inflect the final decision by the company management. For example: Each bondholder had its own agenda and style. Getting all parties to accept a proposal would prove challenging. Also, whether the issuing will be successful, and whether the owner’s cash flow will remain strong enough to support a cash injection are what they should consider as well. Anyway, the first lesson we have learned in our economic lesson was: People face tradeoff.
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flows and calculate the PVs. (A five year horizon is common, but this can vary.) Typically you will use the WACC as your discount rate. Depending on the circumstances, the estimated cash flows may be available for fewer than five years, or more than five years.
b. Estimate the PV of the terminal value. One estimate for the terminal value involves assuming perpetual cash flows after the initial time horizon, e.g.:
i. If the cash flow after 5 years is expected to grow at a rate g for the foreseeable future: Terminal Value5 (TV5) = FCF6 /(k – g) = FCF5 (1+ g) / (k – g)., where k is the required rate of return. You must discount the TV to time 0, and then add this to the PV of the