Question

Please show the process as detailed as possible. Thank you!!!

Determine the Free Cash Flow (FCF) and the Shareholder Cash Flow (SCF) at the end of each of the next 3 years With the following information

Three (3) investors are associated, each contributing a capital of $ 40 million in cash, to set up and launch the men's clothing business partnership Confort y Elegancia S.A.

The following information is available:
1. Initial investment of $ 60 million in Computer Equipment (5 years depreciation) and $ 140 million in Furniture and Fixtures (10 years depreciation). They depreciate in a straight line according to their useful life and have a salvage value equivalent to 20% of the purchase value of the asset.
2. Simultaneous operations are started in 3 leased premises.
3. The merchandise to be sold corresponds to trousers for $100,000 each, shirts for $50,000 each. Each month, it is planned to sell 500 pants and 1,000 shirts in each store. Annual sales in quantity of product will grow 10% on a constant basis.
4. The gross margin will be 30%. The Final Inventory corresponds to 20% of the Cost of Merchandise Sold and is the same value to be paid to Suppliers.
5. The administration and sales expenses of the first year, in millions of pesos, are:

Leases $120

Other Admin Expenses $100

Publicity and marketing $90

Depreciation in straight line

All costs increase annually at a constant rate of 6%

6. Payroll expenses for the first year are:

One manager with monthly wage of $2,5 million

three administrators with monthly wage $750,000

six sellers with monthly wage of $600,000

Benefits of the sellers and the administrators are 50% of the monthly wage

All labor costs increae yearly at a rate of 5.5%

7. A bank loan of $ 210 million has been agreed for the purchase of fixed assets and working capital with a term of 3 years, payable at 18%, with payment to capital in equal installments. The installment includes interest payments and repayment of the loan.
8. The partners agree not to distribute dividends during the first 5 years.
9. Rent tax rate 34%

Answer 1

Particulars	Year
	1	2	3	4	5
Sales
Shirts	1800000000	1980000000	2178000000	2395800000	2635380000
Pants	1800000000	1980000000	2178000000	2395800000	2635380000			term loan
Total	3600000000	3960000000	4356000000	4791600000	5270760000			210000000	18%
Gross margin	1,08,00,00,000.00	1,18,80,00,000.00	1,30,68,00,000.00	1,43,74,80,000.00	1,58,12,28,000.00		year	loan o/s	Interest	repayment
Less:							1	210000000	37800000	107800000
Leases	120000000	127200000	134832000	142921920	151497235.2		2	140000000	25200000	95200000
other admin	100000000	106000000	112360000	119101600	126247696		3	70000000	12600000	82600000
Publicity & marketing	90000000	95400000	101124000	107191440	113622926.4
Payroll	78600000	82923000	87483765	92295372.08	97371617.54		Depreciation schedule
Benefits	39300000	41461500	43741882.5	46147686.04	48685808.77
Depreciation	32000000	32000000	32000000	32000000	32000000		Computer equipment	60000000
Interest	37800000	25200000	12600000				Salvage value	12000000
Total exp	497700000	510184500	524141647.5	539658018.1	569425283.9
							Depreciation/year	9600000
PBT	58,23,00,000.00	67,78,15,500.00	78,26,58,352.50	89,78,21,981.89	1,01,18,02,716.09
Less: tax	197982000	230457270	266103839.9	305259473.8	344012923.5		Furniture & fixtures	140000000
PAT	38,43,18,000.00	44,73,58,230.00	51,65,54,512.65	59,25,62,508.05	66,77,89,792.62		salvage value	28000000
Capex	20,00,00,000.00
FCF	21,63,18,000.00	47,93,58,230.00	54,85,54,512.65	62,45,62,508.05	69,97,89,792.62		Depreciation	22400000
Less: term loan	70000000	70000000	70000000
Salvage value after tax					7920000
FCF to shareholders	14,63,18,000.00	40,93,58,230.00	47,85,54,512.65	62,45,62,508.05	70,77,09,792.62