Can you please write down the steps on paper instead of excel?
The following table provide cash flow, earnings and dividend statistics for General Electric. (In millions of dollars, except per-share amounts.) 2000 2001 2002 2003 2004 30,009 39,398 34,848 36,102 36,484 Cash from operations Cash investments Free cash flow 37,699 40,308 61,227 21,843 38,414 -7,690 -910 -26,379 14,259 -1,930 12,735 13,684 14,118 15,002 16,593 Earnings Earnings per share (EPS) Dividends per share (DPS) 1.29 1.38 1.42 1.5 1.6 0.57 0.66 0.73 0.77 0.82 a. Whys do you exclude investments in financial assets when computing the free cash flow for valuation purposes? b. Would you use the discounted cash flow method to value GE shares at the end of the year 1999? Explain your answer. c. After years of negative free cash flows that ended in 2002, GE experienced a positive free cash flow of over $ 14 billion. Would you interpret the 2003 free cash flow as good news? d. Assume that the cost of equity for GE is 13% per year. If the cost of debt is 6% per year, compute GE's cost of capital (WACC). Assume that GE capital structure is split 50% debt and 50% equity. e. Assume that the value of GE enterprise is forecasted to be $1.6 trillion at the end of 2005. Use the discounted cash flow methodology to compute the per share value of GE. Assume that GE has 10 billion shares outstanding during 1999. Assume also that GE's total liabilities stand at $380 billion as of year end 1999. The following table provide cash flow, earnings and dividend statistics for General Electric. (In millions of dollars, except per-share amounts.) 2000 2001 2002 2003 2004 30,009 39,398 34,848 36,102 36,484 Cash from operations Cash investments Free cash flow 37,699 40,308 61,227 21,843 38,414 -7,690 -910 -26,379 14,259 -1,930 12,735 13,684 14,118 15,002 16,593 Earnings Earnings per share (EPS) Dividends per share (DPS) 1.29 1.38 1.42 1.5 1.6 0.57 0.66 0.73 0.77 0.82 a. Whys do you exclude investments in financial assets when computing the free cash flow for valuation purposes? b. Would you use the discounted cash flow method to value GE shares at the end of the year 1999? Explain your answer. c. After years of negative free cash flows that ended in 2002, GE experienced a positive free cash flow of over $ 14 billion. Would you interpret the 2003 free cash flow as good news? d. Assume that the cost of equity for GE is 13% per year. If the cost of debt is 6% per year, compute GE's cost of capital (WACC). Assume that GE capital structure is split 50% debt and 50% equity. e. Assume that the value of GE enterprise is forecasted to be $1.6 trillion at the end of 2005. Use the discounted cash flow methodology to compute the per share value of GE. Assume that GE has 10 billion shares outstanding during 1999. Assume also that GE's total liabilities stand at $380 billion as of year end 1999
