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
- Prepare a 10-year cash flow forecast based upon the rate of growth in cash flow between 2017 and 2018.
- 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 |
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