Free Cash Flows Calculation
Saturday, January 30th, 2010+ EBIT [from Income Statement, do not deduct interest bc WACC already includes Kd]
- TAX [income tax charged by Governments]
+ Depeciation [not a cash movement]
- Delta Working Capital
- Delta Capital Expenditure
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Free Cash Flow (FCF)
–> PV=FCF/(1-WACC)*n
–> NPV=PV- Initial Investment + PV of “Residual Values”
Residual Values:
There are various ways of calculating the residual values….
a) Profit After Tax for the last period by P/E Ratio [PATn x P/E]
b) FCF of the last year by growh rate, divided by annuity [FCF(1+g)/WACC-g)
