Chapter 2: Problem: 14

Sales
CGS
Other expenses
Depreciation
EBIT

Avinash Rao - Asia MBA

CF HW 1: 2011418016
196000
104000
6800
9100
76,100

Answer a) 2009 Operating Cash Flow

OCF = EBIT + Dep - Taxes
OCF
63,745

Answer b) 2009 Cash Flow to creditors

Interest
14800
+ Redeemed Debt
7300
22100

Answer c) 2009 Cash Flow to stockholders

Dividend Paid
10400
- New equity offering
5700
4700

Answer d) Calculate Net working Capital

Net capital Spending = Net fixed Assets + dep
36,100
CFAA = OCF - NCS - NWC
CFAA= Cash Flw creditors+Cash Flw stockholdrs
Therefore NWC = OCF - NCS - CFAA
845

Chapter 2:Problem: 22
Answer a)
2008
A=L+E
Equity

2009
A=L+E
Equity

1661

Answer b)
Change in net working Capital

2142

22

Answer c)
NCS = Net Fixed Assets + Depreciation
NCS
1287
Fixed Assets Sold = Fixed Assets bought - NCS
1350-1287
63
OCF = EBIT + Dep - Taxes
OCF

3204.5

CFFA = OCF - NCS - NWC

CFFA

1895.5

Sales
CGS
Depreciation
EBIT
Interest
Taxes
NI

8280
3861
738
3681
211
3470
1214.5
2255.5

Answer d)
BB - Paid + New = EB
Long term Debt Paid
Cash Flow to creditors
Interest Paid
Change in Debt

Chapter 5: Problem 14:

PV
FV
t
r
?
r = (FV / PV)1/t 1

180

211
90
121
Chapter 5: Problem 17:
PV
?
FV
t
r
PV = FV/ (1+r)^t

1
43125
113
9.90%

Chapter 6: Problem 57:

EAR = [1+APR/m]^1/12 - 1
Before Retirement
1.1^(1/12)
1.00797414
APR/12
0.80%

After Retirement
1.07^(1/12)
1.005654145
0.57%

Timeline: 31 - 55 years
Baggins wants 20,000 for 25 years after retiring
Present Value of Annuity
PV=C(1-1/(1+r)^t)/r
20000*(1-(1/1.0056)^300)/0.0056
2,902,680
Baggins wants to provide 900,000 to Frodo after 25 years of withdrawal of the amount
Present Value of Inheritance
PV=FV/(1+r)^t
900000/(1.0056)^300
168,525
Total Future Value to be generated
3,071,205
Timeline: First 10 years
Currently Bilbo Baggins can save 2,500.
Estimated Dream Cottage Cost in 10 years : 380,000
Future Value of Savings
2500*((1.008)^120-1)/0.008
500,543.67
After he purchases the cabin

120,543.67

170000
9
12
61,303.70

After 20 years it will grow to:

FV=PV(1+r)^t
120543.67*(1.008)^240
815,966.10
Timeline: 11 - 30 Years
Net Value required to be generated between 11 - 30 years
2,255,239
C=FV/((1+r)^t -1)/r
2,255,239/(((1.008)^240-1)/0.008)
3,127.36
Thus Bilbo Baggins will need to save 3,127.36 per month for the next 20 years

Chapter 6: Problem 66:

Answer a)
PV of 105000 p.a
105000*(1-(1/1.07)^20)/0.07
Per Annum Deposit
1,112,371/(((1.07)^30-1)/0.07)
Answer b) Lumspsum Payment
PV = FV/ (1+r)^t
1,112,371/(1.07)^30
Answer c)
Cash Flow 1=1500
Cash Flow 2=25000
FV=C((1+r)t-1)/r
FV=PV(1+r)t
CF 1 + CF 2
Req Net Future Value
C = FV/ [ (1+r)^t -1/r)

1,112,371
11,776.01

146,129

t=30 yrs
when 55 yrs
141,691 CF 1
295,072.70 CF 2
436,764
1,112,371-436,764
675,608
675,608/(((1.07)^30-1)/0.07)

7,152

to creditors

orking Capital
t fixed Assets + dep

Cash Flw stockholdrs

FV1
120,544
Cottage

602 FV of saving
380000 1,898 PV of Inheri + pension
2,500

Net Surplus

Net Value
PV of Inheri + pension
PV

For investment
C = FV/ [ (1+r)^t -1/r)

815,966
3,071,205

Annuity after retirement

1,161

13,933.98
6,066.02

2,255,239
3,071,205
2,902,680

348,349.45

60

11 to 30 yrs
3,127

PV of 900000

168,525