INTRODUCTION TO FINANCE

SAMPLE CASH FLOW TEMPLATE*

* The attached template has been prepared so that you may feel comfortable preparing
spreadsheet models. Recall in class I emphasized the cash flows for a typical year, and
then years 0 and the final year of your analysis. The attached provides you a complete
example and a template that executes the analysis. We have not given you the
spreadsheet, but an image of it with detailed notes, because we want you to recreate a
spreadsheet yourself. Doing so before executing the analsysis in some of the questions on
the Assignments will hopefully be helpful.

SampleCashFlowTemplate
MaizeMedicalSupply(MMS)isaleaderintheproductionandsalesofXraymachines.Thispastyear,MMSposted$35million(M)in
revenuewithacostofgoodssoldof$22MandSG&Aexpensesof$2M.Theyareprojectingagrowthofthesenumbersof8%,6%,and
2%,respectively,overthenext5years.Whenconsideringtheirshorttermassetsandobligations,MMShas$4Minaccountsreceivable,
$3Minaccountspayableand$5ofinventory.Thecompany'srevenuegrowthwillbelargelydrivenbyspending$20Mtodayonan
equipmentupgrade,whichwillalsoleadtoa$2Mincreaseinaccountsreceivablenextyear.Theexpenditurefortheequipmentupgrade
canbedepreciatedusingthestraightlinemethodoverthenext5years.MMSfacesa35%taxrate,a14%discountrateandtheyare
projectedtobeworth$30Mattheendofourvaluationhorizonof5years.WhatisthevalueofMMStoday?
Informationgivenintheproblem(alldollarfiguresinmillions)
InitialFirmConditions
Revenue
COGS
SG&A

$35.00
$22.00
$2.00

AccountsReceivable
Inventory
AccountsPayable

$4.00
$5.00
$3.00

FutureFirmConditions
RevenueGrowth
8%
COGSGrowth
6%
SG&AGrowth
2%
OnetimeARincrease $ 2.00
TerminalValue $ 30.00
TerminalValueYear
5

Rates
taxrate
discrate

35%
14%

CapitalExpenditure
Intitialinvestment $20.00
Expectedlife
5

Calculations
Annualdepreciationduringequipmentlife
Time
WorkingCapital
ChangeinWC

0
6

$ 4.00
1
8
2

2
8
0

3
8
0

4
8
0

Time
Revenue
COGS
SG&A
LessDep
OperatingProfit
Tax
NOPAT
PlusDep
ChangeinWorkingCapital
CAPX
FreeCashFlow
PV(FCF)
PV(TerminalValue)

1
$35.00
$(22.00)
$(2.00)
$(4.00)
$
$ 7.00
$
$(2.45)
$
$ 4.55
$ 4.00
$
$(2.00)
($20.0) $
$(20.00) $ 6.55
$(20.00) $ 5.75

2
$ 37.80
$(23.32)
$ (2.04)
$ (4.00)
$ 8.44
$ (2.95)
$ 5.49
$ 4.00
$
$
$ 9.49
$ 7.30

3
$ 40.82
$(24.72)
$ (2.08)
$ (4.00)
$ 10.02
$ (3.51)
$ 6.52
$ 4.00
$
$
$ 10.52
$ 7.10

4
$ 44.09
$(26.20)
$ (2.12)
$ (4.00)
$ 11.77
$ (4.12)
$ 7.65
$ 4.00
$
$
$ 11.65
$ 6.90

TotalNPV
TotalNPV

$29.31 Summingpresentvaluesofthefreecashflowsandthepresentvalueoftheterminalvalue
$29.31 ComputingtheNPVwithhelpfromExcel'sNPVfunction

$
$
$

5
8 AR+InvAP
0 WC(thisperiod)WC(lastperiod)
5
$ 47.62
$(27.77)
$ (2.16)
$ (4.00)
$ 13.68
$ (4.79)
$ 8.89
$ 4.00
$
$
$ 12.89
$ 6.69
$ 15.58

(LastYear'sRevenue)*(1+RevenueGrowth)
(LastYear'sCOGS*(1+COGSGrowth)
(LastYear'sSG&A*(1+SG&AGrowth)
Investment/ExpectedLife[ifapplicable]
Sumoftheabovefouritems
(OperatingProfit)*(1TaxRate)
Sumoftheabovetwoitems
LessINCREASESinWCfromearliercalculation
Sumoftheabovefouritems
eachyear'sFCFdiscountedtotoday'sdollars
terminalvaluediscountedtotoday'sdollars