Cash Flow Spreadsheet - Excel by SmallBusinessForum

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Free Cash Flow vs Cash Flows to Shareholders - Cash flow worksheets - subsidized and unsubsidized. 3 page worksheet: subsidized, unsubsidized and bullet. Works with Microsoft ExcelPr

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									FREE CASH FLOW VS. CASH FLOWS TO SHAREHOLDERS
DATA Cost of debt Tax rate Cost of equity 10% 40% 12% EBIT Investment Amount borrowed 6.00 12.00 4.00

CASH FLOWS TO SHAREHOLDERS Year EBIT Less interest Earnings before taxes Taxes Net income Investment by shareholders Net cash flow to shareholders NPV at cost of equity Market value of equity 0 1 6.00 (0.40) 5.60 (2.24) 3.36 3.36 2 6.00 (0.40) 5.60 (2.24) 3.36 3.36 3 6.00 (0.40) 5.60 (2.24) 3.36 3.36 Goes on forever

(8.00) (8.00) 20.00 28.00

WEIGHTED AVERAGE COST OF CAPITAL Proportion of Market Value 12.5% 87.5% Weighted Cost of Capital 0.8% 10.5% 11.3%

Cost of Capital Debt (after-tax) Equity Weighted average cost of capital 6.0% 12.0%

FREE CASH FLOW Year EBIT Taxes EBIAT Investment Free cash flow NPV at WACC 0 1 6.00 (2.40) 3.60 3.60 2 6.00 (2.40) 3.60 3.60 3 6.00 (2.40) 3.60 3.60 Goes on forever

(12.00) (12.00) 20.00

AFTER-TAX CASH FLOWS FROM LENDERS Year Interest Interest tax shield After-tax interest Principal receipt (repayment) Principal plus after-tax interest NPV at after-tax cost of debt 0 1 (0.40) 0.16 (0.24) (0.24) 2 (0.40) 0.16 (0.24) (0.24) 3 (0.40) 0.16 (0.24) (0.24) Goes on forever

4.00 4.00 -

CONCLUSION Cash flows to shareholders After-tax cash flows to lenders Free cash flow (8.00) (4.00) (12.00) 3.36 0.24 3.6
								
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