Create a Free Cash Flow and Discounted Cash Flow Statement. The tax rate and discount rate...

Create a Free Cash Flow and Discounted Cash Flow Statement. The tax rate and discount rate are not given, so the percentage below is an assumption. If there are better assumptions, then feel free to use that with a description as to why it is better. The EBIT is from the company that is trying to bought; their stand alone basis projected income statement and balance sheet. Show all calculations.

Would you say the merger is a good idea?

	2015	2016	2017	2018	2019	2020	2021
EBIT	$3,052	$3,210	$3,470	$3,683	$3,915	$4,118	$4,188
Tax Rate	36%	36%	36%	36%	36%	36%	36%
Discount Rate	12%	12%	12%	12%	12%	12%	12%
Capital Expenditures	$2,365	$2,070	$1,910	$1,930	$1,930	$1,949	$1,969
Increase in EBIT Pre-merger	$0	$214	$529	$844	$1,159	$1,260	$1,260
Increase in EBIT Post Merger	$0	$214	$529	$968	$1,407	$1,631	$1,755
NWC	-$192	-$128	-$134	-$140	-$146	-$151	-$154

Expert Solution

	2015	2016	2017	2018	2019	2020	2021
EBIT	3,052	3,210	3,470	3,683	3,915	4,118	4,188
Tax Rate	36%	36%	36%	36%	36%	36%	36%
Discount Rate	12%	12%	12%	12%	12%	12%	12%
Capital Expenditures	2,365	2,070	1,910	1,930	1,930	1,949	1,969
Increase in EBIT Pre-merger	0	214	529	844	1,159	1,260	1,260
Increase in EBIT Post Merger	0	214	529	968	1,407	1,631	1,755
NWC	-192	-128	-134	-140	-146	-151	-154

Free Cash Flow
EBIT	687	1,140	1,560	1,753	1,985	2,169	2,219
Tax	247.3	410.4	561.6	631.08	714.6	780.84	798.84
NOPAT	440	730	998	1,122	1,270	1,388	1,420
Less: Capex	2,365	2,070	1,910	1,930	1,930	1,949	1,969
Less: NWC	-192	-128	-134	-140	-146	-151	-154
Free Cash Flow	-1,733	-1,212	-778	-668	-514	-410	-395

Discounted Cash Flow Statement
Discount rate	0.8929	0.7972	0.7118	0.6355	0.5674	0.5066	0.4523
Discounted Cash Flow Statement	-1548	-966.518	-553.48	-424.577	-291.43	-207.638	-178.606


Merger Is Good
As Increase in cash flow due to Merger
Increase in EBIT Pre-merger	0	214	529	844	1159	1260	1260
Increase in EBIT Post	0	214	529	968	1407	1631	1755
Net Increase in EBIT	0	0	0	124	248	371	495
Increase in Tax	0	0	0	44.64	89.28	133.56	178.2
NOPAT	0	0	0	79.36	158.72	237.44	316.8

ekkarill92 answered 1 year ago

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