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good morning!
i have reproduced a cashflow statement given in a question (bpp). we are supposed to value of the company using free cashflow for the next 5 years. growth rates are also given.
i know the mechanics but what i dont know is how to get the starting figure. of course that means i totally lack the understanding of FCF and FCFE.
In the answer, it simply says “based on the X5 FCFE post reinvestment of 87.2, which represents a surrogate for the dividend that could be paid….”
how does he get this figure?
what does post reinvestment signify?————————————————————X5———————-X4
Net cashflow from operating activities ——-210———————–95
Return on Investment
and servicing of finance
Interest received————————12——————————6
interest paid——————————(4)—————————–(3)
interest element in fin. leases——-(6.5)————————–(4)
———————————————————–1.5————————(1)
taxation————————————————(4.1)———————–(0.2)
Cap Ex————————————————(120.2)——————–(75)
Acquisition and
Disposals
Proceeds from sale of Joint ventures———10
cash inflow before mgmt of liquid
resources———————————————97.2————————-33.8
Management of liquid
resources
Dec/(inc) of short term deposits—————35.5————————–(32.2)
Financing
Repayment of secured loan——————–(31)—————————-(25)
inc/(dec) in cashflow for the year————-101.7—————————(23.4)It is difficult for me to follow the figures because the tabbing comes out strange on here.
Please tell me the name of the question in the BPP Revision Kit and then I can look at it properly.
The 87.2 is the cash inflow before bringing in the proceeds of the sale of the joint venture (which is something that will not be repeated in the future) .
thank u ..:) i guess i am still confused as to what constitutes FCF. i will read up more and ask u again….:)
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