1 1234567822 A B C Milestone One: Time Value of Money * Dollar amounts are in millions $ Question 1. Interest Rate FCF - Years 5% FCF in dollars* D E (please fill in YELLOW cells) 2022 2021 F G H | J K L 2020 $ 7,736,000.00 $ 2,833,000.00 $ (612,000.00) Pv* $(7,367,619.05)| $(2,569,614.51) $ 528,668.61 10 11 Total Pv* 12 $(9,408,564.95) 13 *In millions 15 17 18 Question 2. Interest Rate 5% 19 FCF - Years 2022 2021 2020 20 FCF in dollars* $ (612,000.00) $ 2,833,000.00 $ 7,736,000.00 21 22 Pv* $ 582,857.14 $ (2,569,614.51) $ (6,682,647.66) 23 24 25 26 Total Pv* *In millions $(8,669,405.03) 27 28 Question 3. Interest Rate 7% Required Rate of Return for Risk Associated With Projected Future Three Year's Free Cash Flows. 5% Numbers from Q1 29 30 FCF-Years 2020 2021 2022 2023 2024 31 FCF in dollars* $ (612,000.00) $ 2,833,000.00 $ 7,736,000.00 $ $ - 32 33 Pv* $ 571,962.62 $(2,474,451.92) $(6,314,880.38) $ $ $ 34 37 *In millions 38 Total Pv* $(8,217,369.68) 39 40 41 42 43 44 45 46 47 M N Instructions and Explanations Free cash flows (FCF), for this exercise is difference between cash generated from operating income minus capital expenses at the end of your company's fiscal or calendar year. The present value of free cash flows is one method of determining a company's value to a potential buyer. Note: For Milestone One, please use the adjusted free cash flows calculated for your selected company on Tab 2 (Selected Co. for Project) of this Excel workbook. Use 5% as the interest rate for these questions. For the purpose of this exercise, what will happen to the total PV if your selected company's free cash flows for each year reported in Question 1 were reduced by 10%? $ 2025 Your selected company is projecting that free cash flows for the next three (3) years will increase by 3% annually. Using the free cash flows from Question 1 above, increase each of the future free cash flows by 3% and enter these numbers in the yellow highlighted areas. As there is a chance that these increases may not occur as projected, a buyer who may be willing to purchase the company before the increases occur, will account for this risk by using a required rate of return of 7%. What price would the potential buyer be willing to pay based upon the known free cash flows and the future projected free cash flows? Once you have completed these calculations, proceed to write your written analysis.