QUESTION 1

Washed Water, a technology manufacturer that produces water purification products for businesses, had net cash flows of $14 280 000 from operating activities in 2017. Dividends are $1 245 000. Inventory cost $11 645 000 in 2017, with equipment repairs and maintenance amounting to $ 1 445 000. Its 2016 free cash flow (FCF) is calculated as $ 5 135 000.

A) Calculate Washed Waters capital expenditure.

B) Washed Water is predicting its FCF next year (year 1) to be $ 5 000 000. The free cash flows are expected to grow by 7% each year. The company has a weighted average cost of capital of 16%. Ignoring the FCF from previous years, calculate the NPV of the companys future FCFs

	Year 1	Year 2	Year 3
FCF
Terminal value
Total FCF value
NPV

QUESTION 2

An investor purchased 6 800 shares for $17.62 per share in 2018. He sold 1 800 shares for $19,40 shortly before dividends of $ 0.60 per share were declared. A year later, in 2019, his total wealth was $122 920, including shares and cash from the share sale.

A) Calculate the share price in 2019. Round off the calculated share price to the nearest cent.

B) Calculate the percentage return the shareholder has achieved between 2018 and 2019.

QUESTION 3

Please read the excerpt below from the Daily Maverick on 24 October 2019 and answer the following question: Profits go Boeing Boeing gone Boeing recorded a 53% drop in quarterly profit today, with much of the financial blow coming from its grounded 737 MAX fleet. The aircraft company posted a negative free cash flow of $2.89-billion for the quarter, down from over $4-billion in profit in the same quarter a year ago.

Discuss what could have caused Boeings negative free cash flow of $2,89 billion.