FREE CASH FLOWS

Estimating Cash Flows

2
3
 CASH REVENUES

Working capital
Investment Cash operating expenses
Including taxes but
excluding interest
Fixed capital
investment

FCFF
Interest payment to
bond holders

FCFE Net Borrowing

from
bondholders
 FREE CASH FLOWS OF FIRM V/S EQUITY
FREE CASH FLOW FOR ALL FREE CASH FLOW FOR EQUITY
INVESTORS SHARE HOLDERS

EBIT (1-T) PAT

+ Depreciation and non cash charges + Depreciation and non cash charges

- Capital Expenditures - Capital Expenditures

- Changes in Working Capital - Changes in Working Capital

– Repayment of Debt

+ Proceeds from debt issues

5
 What are Free cash flows and determine the free cash flows
of XYZ Limited from following projected figures ( in Lakhs

YEAR 2011 2012 2013 2014 2015

Rs lakhs

PBIDT 350 400 470 525 600

Depreciation 100 135 145 110 90

Interest 55 56 58 62 77

Capital Expenditure 250 100 75 20 55

Inc in Working Capital 35 38 42 45 52

Repayment of debt 50 450

Proceeds from Debt issue 500

Tax 35%

6
 FREE CASH FLOW OF XYZ LTD
FREE CASH FLOW OF THE FIRM
2011 2012 2013 2014 2015
PBIDT 350 400 470 525 600
Depreciation 100 135 145 110 90
PBIT 250 265 325 415 510
PBIT(1--T) 162.5 172.25 211.25 269.75 331.5
Depreciation 100 135 145 110 90
Capital Expenditure 250 100 75 20 55
Inc in Working Capital 35 38 42 45 52

FREE CASH FLOW OF A

FIRM -22.5 169.25 239.25 314.75 314.5

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 FREEFREECASH 2011
FLOW
CASH FLOW FOR EQUITY
2012
FOR EQUITY
2013 2014 2015
PBIDT 350 400 470 525 600
Depreciation 100 135 145 110 90
Interest 55 56 58 62 77
PBT 195 209 267 353 433
Tax 68.25 73.15 93.45 123.55 151.55
PAT 126.75 135.85 173.6 229.45 281.45
Depreciation 100 135 145 110 90
Capital
Expenditure 250 100 75 20 55
Inc in Working
Capital 35 38 42 45 52
Repayment of
debt 50 450
Proceeds from
Debt issue 500
FREE CASH
FLOW FOR
EQUITY 441.75 132.85 201.6 224.45 -185.55