ASSIGNMENT 10

1. Is cash flow analysis important for valuing firms.

2. GAAP cash flow statements treat interest capitalized during construction as investment in plant.
Do you agree with this practice?

3. Why might an analyst not put much weight on a firm's current free cash flow as an indication of
future free cash flow?

4. Explain why very profitable firms sometimes have negative free cash flows.

5. A firm reported comprehensive income of$376 million for 2012, consisting of $500 million in
operating income (after tax) less $124 million of net financial expense (after tax). It also reported
the following comparative balance sheet (in mill ions of dollars):

Balance Sheet
2012 2011 2012 2011
Operating cash 60 50 Accounts 1,200 1,040
payable
Short-term 550 500 Accrued 390 450
investments (at liabilities
market)

Accounts 940 790 Long-term 1,840 1,970

receivable debt

Inventory 910 840

Property and 2,840 2,710 Common 1,870 1,430
plant equity

5,300 4,890 5,300 4,890

Calculate free cash flow using Method 1 and Method 2.

6. The following information is from the financial report of a pure equity company (one with no net
debt). In millions of dollars.

Common shareholders' equity, December 31, 2011 174.8

Common dividends, paid December 2012 8.3
Issue of common shares on December 31, 2012 34.4
Common shareholders' equity, December 31, 2012 226.2

The firm had no share repurchases during 2012. Calculate the firm's free cash flow for 2012.
 7. The following information is for a firm that has net debt on its balance sheet (in millions of dollars).

Common shareholders' equity, December 31, 2011 174.8

Common dividends, paid December 2012 8.3
Issue of common shares, December 2012 34.4
Common shareholders' equity, December 31 , 2012 226.2
Net debt, December 31, 2011 54.3
Net debt, December 3 1, 2012 37.4

There were no share repurchases during 2012. The firm reported net interest after tax of $4 million
on its income statement for 2012, and this interest was paid in cash. Calculate the firm's free cash
flow for 2012.

Instructions:
a. Answer this question in groups with word & ppt format.
b. Submit this assignment (soft copy only) via email by only the team leader group to:
ika.pratiwi@president.ac.id
c. Subject email: ex: Group 1 Assignment 1; Group 2 Assignment 1; etc.
d. Submit deadline: March 30th 2019 at 11.59 p.m.

Thank you and good luck!