Question

Using the information from the cash flow statement, perform a Discounted Cash Flow valuation of your organisation. Attempt to value the shares of your company at the beginning of the period. Assume cost of capital of 5 %. (Show these calculations in Excel)

Item	07/16
Operating Cash Flow	($millions)
Receipts from Customers	2,944.56
Payments to Suppliers and Employees	-2,745.75
Dividends Received	0.00
Interest Received	0.00
Interest Paid	-16.50
Tax Paid	-28.04
Other Operating Cashflows	8.18
Net Operating Cashflows	162.46
Investing Cash Flow
Payment for Purchase of PPE	-75.18
Proceeds From Sale of PPE	39.49
Investments Purchased	-9.80
Proceeds From Sale of Investments	0.00
Payments for Purchase of Subsidiaries	-4.36
Proceeds from Sale of Subsidiaries	6.38
Loans Granted	0.00
Loans Repaid	0.00
Other Investing Cashflows	1.12
Net Investing Cashflows	-42.35
Financing Cash Flow
Proceeds from Issues	0.00
Proceeds from Borrowings	1.50
Repayment of Borrowings	-41.83
Dividends Paid	-58.44
Other Financing Cashflows	-3.65
Net Financing Cashflows	-102.42
Net Increase in Cash	17.69
Cash at Beginning of Period	32.20
Exchange Rate Adj	0.00
Other Cash Adjustments	0.00
Cash at End of Period	49.88

Answer 1

Let's first calculate the free cash flows:

Parameter	Linkage	$ million
Receipts from Customers	A	2,944.56
Payments to Suppliers and Employees	B	-2,745.75
Tax Paid	C	-28.04
Payment for Purchase of PPE	D	-75.18
Free Cash flows	A + B + C+ D	95.59

Assumign the free cash flows in perpetuity,

a Discounted Cash Flow valuation of your organisation = C/ r = 95.59 / 5% = $  1,912 million