Question

In: Finance

Using the following free cash flow data: Year                Cash Flow 2017                $4,000,000

Using the following free cash flow data:

Year                Cash Flow

2017                $4,000,000

2018                $4,400,000

  1. Prepare a 10-year cash flow forecast based upon the rate of growth in cash flow between 2017 and 2018.
  2. Calculate the net present value of the forecasted cash flows assuming an immediate investment cost of $18,500,000

Please show your work so I can recreate in excel

Solutions

Expert Solution

Cash flow in 2017 = $4,000,000

Cash flow in 2018 = $4,400,000

Growth in cashflow = Cashflow in 2018 / cashflow in 2017 - 1 = 4400000 / 4000000 - 1 = 10%

Cashflows:

Year Cashflow
2017      4,000,000.00
2018      4,400,000.00
2019      4,840,000.00
2020      5,324,000.00
2021      5,856,400.00
2022      6,442,040.00
2023      7,086,244.00
2024      7,794,868.40
2025      8,574,355.24
2026      9,431,790.76
2027    10,374,969.84
2028    11,412,466.82

IRR (Using IRR function in excel):

Year Cashflow
2018 - 18,500,000.00
2019      4,840,000.00
2020      5,324,000.00
2021      5,856,400.00
2022      6,442,040.00
2023      7,086,244.00
2024      7,794,868.40
2025      8,574,355.24
2026      9,431,790.76
2027    10,374,969.84
2028    11,412,466.82
IRR 31.91%
Year Cashflow [email protected]% Present Value
2018 - 18,500,000.00 1 - 18,500,000.00
2019      4,840,000.00      0.7581      3,669,254.21
2020      5,324,000.00      0.5747      3,059,869.65
2021      5,856,400.00      0.4357      2,551,690.82
2022      6,442,040.00      0.3303      2,127,909.61
2023      7,086,244.00      0.2504      1,774,509.38
2024      7,794,868.40      0.1898      1,479,801.37
2025      8,574,355.24      0.1439      1,234,038.05
2026      9,431,790.76      0.1091      1,029,090.75
2027    10,374,969.84      0.0827          858,180.81
2028    11,412,466.82      0.0627          715,655.35
IRR 31.9069% NPV -                    0.00

jeff jeffy answered 1 year ago
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