It has a operating cash flows of $15m per year and free cash flow of $10m per year for the next 15 years, and a required return of 5%.

Part 1: What is the minimum cash foow at which wed be willing to approve this project, and how does it compare with the cash flow estimates weve been given?

Part 2: How should we expect this project to affect the value of the firm? Discuss whether you think management should approve or reject this project?

6) Continue analyzing the company from the previous question a) The management of this company has proposed implementing a set of operational improvements that will sustainably increasse both operating cash flow and free cash flow by $1m per year at a cost of $15m today. Will this decision create or destroy value for the firm? Explain your reaoning ThiS iu creant v Fr The Far. H? S5A S esmA bt on it we ioww va Per The Fim Need Calculcha to suppa dhin heanunins b) How should management decide whether it's better to invest the company's cash flows to create future growth or to pay a dividend to its shareholders? Maagoan s Te lek AT (D Thcy h Te Meig te fay A dsia Te TS ShAthnaDs T .T This c,iwnul le: anNPUSo muetmat? Section 4: Capital Budgeting 7) Suppose a company is considering an investment with an initial cost of $100m. Our forecasts suggest that the project will produce operating cash flow of $15m per year and free cash flow of $10m per year for the next 15 years. We've been asked to evaluate it using a required return of 5 %. a) Calculate the Net Present Value (NPV) of this project and interpret your results What conclusions can you draw from this estimate? NPV11SM Fov 15 yeaw's WITA AN ieitian CoSt or $a The Contay wi see 9ai oP 41,ouT.7 M. S10m For 15 yeavs S% Aeauives terw X Incareet b) Calculate the Internal Rate of Return of this project and interpret your result. What conclusions can you draw from this estimate? RATE CF YeTurw 15M For 15 yonrs Nate OF yetvi wovi be S1SM Sn Fr 15 years