I need help with problem 2.2, regarding Free Cash flow, I have calculated the EBITDA, but are unsure about the NWC

Problem 1.4 (6%) An investor acquired atto a portfolio of shares for DKK 1.95 million. Att - 1, the investor sold the portfolio for DKK 2.1 million. In the period from t=0 tot 1, the investor received dividends of DKK 0.04 million from the portfolio. Calculate the investor's period return of the portfolio described. Problem 1.5 (14%) Consider a share in a given firm. In the next period, all market participants agree that in one period, there are only three possible states of the economy and associated re- alized returns on the shares of the firm: State Probability 0.25 0.45 0.30 Realized Return -0.16 0.13 -0.21 Calculate the standard deviation of the return on the shares of the given firm. Problem 1.6 (13%) Lucky Luke has won on a scratch off lottery ticket the equivalent of an extra monthly salary of DKK 22,000 each month for the next 9 years. The first extra monthly salary is paid in exactly one month. The discount rate calculated annually is 1.1%. Calculate the present value (PV) of Lucky Luke's win in DKK million. Problem 2 (55%) Ignore taxes in this problem. All budget data is provided in real terms with January 1, 2020 (t=0) as the base. 360 days are counted for a year. Karla Farma is a pharmacy assistant and is currently working at a pharmacy in Odense, where her monthly salary is DKK 29,000 per month. Karla Farma is consider- ing starting her own health food and skin care shop in a side street to the main pedes- trian street in Odense. The product range will be organic health food and skin care products. karla Farma will be the sole owner of the store. Karla Farma will also sell its products online from a backroom of the shop. Karla Farma has found some suitable premises for a monthly rent of DKK 16,000 in- cluding utility costs (electricity, water and heating). Capital expenditures! (t=0) for the refurnishing and remodeling of the premises incl. IT etc. amounts to DKK 350,000. When the lease ends, the scrap value of the interior is expected to be DKK 35,000. Renting of the premises requires payment (t=0) of a deposit equal to 6 months' rent payments. 3 months rents are expected to be repaid by the landlord when the lease ends December 31, 2025. The annual inflation is expected to be constant at 1.40% in the period 2020-2025. Investment costs. installments (annual payments) and it is assumed that there are no transaction costs (fees, commissions etc.) related to taking out the loan. Karla Farma has estimated that the market risk of the investment is such that the nominal risk premium should be set at 13% calculated annually. The nominal risk-free rate is 0.7% calculated annually. Karla Farma will only make the investment, i.e. establish and run the shop if it is prof- itable over a period of 6 years from the beginning of 2020 to the end of 2025. Problem 2.1 (7%) Calculate the cash flow (per DKK 100 in face value) of the loan and calculate the annual effective yield of the loan. Problem 2.2 (13%) Calculate the total investment costs at t=0 (January 1, 2020) and then calculate the expected free cash flow (FCF) in both real and nominal terms from the investment for each of the 6 years in the period 2020-2025. The real cash flow must be calculated with January 1, 2020 as the base. Problem 2.3 (7%) Calculate the expected cash flow to owners (i.e. the cash flow to karla Farma) in nom- inal terms from the investment per January 1, 2020 and for each of the 6 years in the period 2020-2025. Problem 2.4 (7%) Calculate the value of the shop business per January 1, 2020 and calculate the capi- tal structure weights of equity and debt in the shop business per January 1, 2020 if Karla Farma makes the investment. Problem 2.5 (7%) Calculate the Net Present Value (NPV) of the investment and briefly explains whether the investment should be implemented. Karla Farma thinks that her estimates of the revenue of skin care products in particu- lar is very uncertain. Furthermore, Karla thinks that her assessment of the risk of the project is also very uncertain. Problem 2.6 (14%) Make a sensitivity analysis of the project where you calculate the NPV of the invest- ment at different values of revenue for skin care products and discount rates. In this context discuss under what circumstances and assumptions, you would suggest Karla Farma should proceed with her business idea. The structure of your answer in problem 2.6 could, for example, have the following appearance: For each term state: a) outstanding debt at beginning of the period/term, b) repayment, c) interest payment, d) total payment and e) outstanding debt end of period. Also named the yield to maturity (YTM) or promised yield or IRR of the loan. In the shop business there will be four sales groups: 1. Shop sales of skin care products. 2. Shop sales of health food products. 3. Online sales of skin care products. 4. Online sales of health food products. If Karla Farma does not establish her own shop, Karla Farma expects to remain in her current position indefinitely. To assist in the shop, Karla Farma needs to employ 2 as- sistants for a monthly salary of DKK 25,000 per person. Karla Farma has established the following revenue budget for the next 6 years: Table 2.1: Expected sales revenues (DKK 1.000) 2021 2022 2023 2024 2025 Skin care - Shop Health food - Shop Skin care - Online Health food- Online 400 300 400 100 600 500 600 300 800 700 800 500 900 800 900 600 1,000 900 1,000 700 1,000 900 1,000 700 Gross profit margins for skin care products are expected to be 65%. Gross profit margins for food health products is expected to be 50%. Beginning stocks on January 1, 2020 will equal DKK 200,000 and are paid in cash Jan- uary 1, 2020. Stocks will remain constant during the budget period, i.e. there will be no changes in stocks during the budget period. It is expected, that the net working capital (NWC) is realized at the end of the budget period. Suppliers of both skin care products and health food products offer Karla Farma 40 days credit, which she plans to exploit. All sales are expected to occur in cash, and it can be assumed that all payments are made at the end of each budget period. Capital Expenditures will be paid January 1, 2020. To finance the investment and start-up, Karla Farma takes out a 6-year fixed-rate lin- ear bond loan with a principal of DKK 400,000. The coupon rate of the loan" is 1.50% per year and the price is DKK 97.35 per DKK 100 in face value. The loan has annual Gross profit = Sales - Cost of goods sold. Contribution = Sales - Variable costs. In this problem the firm (the shop) is a trading company. Please note that the only variable costs of the shop in this problem are the costs of goods sold. Because of this the Gross profit margin equals the Contribution margin A linear loan is characterized by a constant repayment of the principal each term. I.e. If the principal (face value) is X and the maturity is N, the repayment each term is equal to X/N. Nominal rate. Problem 1.4 (6%) An investor acquired atto a portfolio of shares for DKK 1.95 million. Att - 1, the investor sold the portfolio for DKK 2.1 million. In the period from t=0 tot 1, the investor received dividends of DKK 0.04 million from the portfolio. Calculate the investor's period return of the portfolio described. Problem 1.5 (14%) Consider a share in a given firm. In the next period, all market participants agree that in one period, there are only three possible states of the economy and associated re- alized returns on the shares of the firm: State Probability 0.25 0.45 0.30 Realized Return -0.16 0.13 -0.21 Calculate the standard deviation of the return on the shares of the given firm. Problem 1.6 (13%) Lucky Luke has won on a scratch off lottery ticket the equivalent of an extra monthly salary of DKK 22,000 each month for the next 9 years. The first extra monthly salary is paid in exactly one month. The discount rate calculated annually is 1.1%. Calculate the present value (PV) of Lucky Luke's win in DKK million. Problem 2 (55%) Ignore taxes in this problem. All budget data is provided in real terms with January 1, 2020 (t=0) as the base. 360 days are counted for a year. Karla Farma is a pharmacy assistant and is currently working at a pharmacy in Odense, where her monthly salary is DKK 29,000 per month. Karla Farma is consider- ing starting her own health food and skin care shop in a side street to the main pedes- trian street in Odense. The product range will be organic health food and skin care products. karla Farma will be the sole owner of the store. Karla Farma will also sell its products online from a backroom of the shop. Karla Farma has found some suitable premises for a monthly rent of DKK 16,000 in- cluding utility costs (electricity, water and heating). Capital expenditures! (t=0) for the refurnishing and remodeling of the premises incl. IT etc. amounts to DKK 350,000. When the lease ends, the scrap value of the interior is expected to be DKK 35,000. Renting of the premises requires payment (t=0) of a deposit equal to 6 months' rent payments. 3 months rents are expected to be repaid by the landlord when the lease ends December 31, 2025. The annual inflation is expected to be constant at 1.40% in the period 2020-2025. Investment costs. installments (annual payments) and it is assumed that there are no transaction costs (fees, commissions etc.) related to taking out the loan. Karla Farma has estimated that the market risk of the investment is such that the nominal risk premium should be set at 13% calculated annually. The nominal risk-free rate is 0.7% calculated annually. Karla Farma will only make the investment, i.e. establish and run the shop if it is prof- itable over a period of 6 years from the beginning of 2020 to the end of 2025. Problem 2.1 (7%) Calculate the cash flow (per DKK 100 in face value) of the loan and calculate the annual effective yield of the loan. Problem 2.2 (13%) Calculate the total investment costs at t=0 (January 1, 2020) and then calculate the expected free cash flow (FCF) in both real and nominal terms from the investment for each of the 6 years in the period 2020-2025. The real cash flow must be calculated with January 1, 2020 as the base. Problem 2.3 (7%) Calculate the expected cash flow to owners (i.e. the cash flow to karla Farma) in nom- inal terms from the investment per January 1, 2020 and for each of the 6 years in the period 2020-2025. Problem 2.4 (7%) Calculate the value of the shop business per January 1, 2020 and calculate the capi- tal structure weights of equity and debt in the shop business per January 1, 2020 if Karla Farma makes the investment. Problem 2.5 (7%) Calculate the Net Present Value (NPV) of the investment and briefly explains whether the investment should be implemented. Karla Farma thinks that her estimates of the revenue of skin care products in particu- lar is very uncertain. Furthermore, Karla thinks that her assessment of the risk of the project is also very uncertain. Problem 2.6 (14%) Make a sensitivity analysis of the project where you calculate the NPV of the invest- ment at different values of revenue for skin care products and discount rates. In this context discuss under what circumstances and assumptions, you would suggest Karla Farma should proceed with her business idea. The structure of your answer in problem 2.6 could, for example, have the following appearance: For each term state: a) outstanding debt at beginning of the period/term, b) repayment, c) interest payment, d) total payment and e) outstanding debt end of period. Also named the yield to maturity (YTM) or promised yield or IRR of the loan. In the shop business there will be four sales groups: 1. Shop sales of skin care products. 2. Shop sales of health food products. 3. Online sales of skin care products. 4. Online sales of health food products. If Karla Farma does not establish her own shop, Karla Farma expects to remain in her current position indefinitely. To assist in the shop, Karla Farma needs to employ 2 as- sistants for a monthly salary of DKK 25,000 per person. Karla Farma has established the following revenue budget for the next 6 years: Table 2.1: Expected sales revenues (DKK 1.000) 2021 2022 2023 2024 2025 Skin care - Shop Health food - Shop Skin care - Online Health food- Online 400 300 400 100 600 500 600 300 800 700 800 500 900 800 900 600 1,000 900 1,000 700 1,000 900 1,000 700 Gross profit margins for skin care products are expected to be 65%. Gross profit margins for food health products is expected to be 50%. Beginning stocks on January 1, 2020 will equal DKK 200,000 and are paid in cash Jan- uary 1, 2020. Stocks will remain constant during the budget period, i.e. there will be no changes in stocks during the budget period. It is expected, that the net working capital (NWC) is realized at the end of the budget period. Suppliers of both skin care products and health food products offer Karla Farma 40 days credit, which she plans to exploit. All sales are expected to occur in cash, and it can be assumed that all payments are made at the end of each budget period. Capital Expenditures will be paid January 1, 2020. To finance the investment and start-up, Karla Farma takes out a 6-year fixed-rate lin- ear bond loan with a principal of DKK 400,000. The coupon rate of the loan" is 1.50% per year and the price is DKK 97.35 per DKK 100 in face value. The loan has annual Gross profit = Sales - Cost of goods sold. Contribution = Sales - Variable costs. In this problem the firm (the shop) is a trading company. Please note that the only variable costs of the shop in this problem are the costs of goods sold. Because of this the Gross profit margin equals the Contribution margin A linear loan is characterized by a constant repayment of the principal each term. I.e. If the principal (face value) is X and the maturity is N, the repayment each term is equal to X/N. Nominal rate