Unlevered Free Cash Flows YEAR 2 Working capital Current operating assets [No - before the number.] Current operating liabilities [No - before the number.] Operating working capital Non-current operating assets [No - before the number.] Non-current operating liabilities [No - before the number.] Net operating assets Net debt Invested capital GAAP Operating Cash Flow GAAP Investing Cash Flow OPAT or EBIT*(1-tax) CapEx [Put - before the number.] Unlevered or enterprise free cash flowUnlevered Free Cash Flows YEAR 2 Working capital Current operating assets [No - before the number.] Current operating liabilities [No - before the number.] Operating working capital Non-current operating assets [No - before the number.] Non-current operating liabilities [No - before the number.] Net operating assets Net debt Invested capital GAAP Operating Cash Flow GAAP Investing Cash Flow OPAT or EBIT*(1-tax) CapEx [Put - before the number.] Unlevered or enterprise free cash flowChecks Year 1 Year 2 NCF - Change in cash =0 -111.00 A- (L+E) =0 Net operating assets - Invested capital =0 Method 1 - Method 2 =0 Method1 - Method3 =0 Enterprise cash flow + Financing cash flow = 0 Income statement Sales 19254.00 COGS 2219.00 SG&A 4351.00 = Operating income 12684.00 Assume that there is no interest receivable or payable remaining at the end of the year. Interest income 43.59 6.00% Interest yield Interest expense 635.65 10.00% Interest expense = Earnings before tax 12091.94 Tax expense 3022.99 25.00% Tax rate Net income 9068.96 There are no deferred taxes. Depreciation in COGS and SG&A 1479.00 Ending balance sheet Cash needed for liquidity 571.00 782.00 = Current financial assets 671.00 782.00 Current receivables 2781.00 3451.00 Inventories 4621.00 4921.00 Current operating assets 7402.00 8372.00 Current assets 8073.00 9154.00 Non-current financial assets 0.00 0.00 Long-term receivables 1498.00 1792.00 PP&E, net 6400.00 7900.00 = Non-current operating assets 7898.00 9692.00 = Non-current assets 7898.00 9692.00 Total assets 15971.00 18846.00 Note payable to the banks 719.00 219.00 Current financial liabilities 719.00 219.00 Accounts payable to suppliers 1976.00 2319.00 Current deferred revenue 1231.00 1345.00 Salary payable 612.00 592.00 = Current operating liabilities 3819.00 4356.00 = Current liabilities 4538.00 4575.00 Long-term debt 6534.00 5241.00 = Non-current financial liabilities 6534.00 5241.00 Long-term deferred revenue 987.00 1029.00 Long-term accrued warranties 1820.00 1400.00 : Non-current operating liabilities 2807.00 2429.00 = Non-current liabilities 9341.00 7670.00 = Total liabilities 13879.00 12245.00Checks Year 1 Year 2 NCF - Change in cash =0 -111.00 A- (L+E) =0 Net operating assets - Invested capital =0 Method 1 - Method 2 =0 Method1 - Method3 =0 Enterprise cash flow + Financing cash flow = 0 Income statement Sales 19254.00 COGS 2219.00 SG&A 4351.00 = Operating income 12684.00 Assume that there is no interest receivable or payable remaining at the end of the year. Interest income 43.59 6.00% Interest yield Interest expense 635.65 10.00% Interest expense = Earnings before tax 12091.94 Tax expense 3022.99 25.00% Tax rate Net income 9068.96 There are no deferred taxes. Depreciation in COGS and SG&A 1479.00 Ending balance sheet Cash needed for liquidity 571.00 782.00 = Current financial assets 671.00 782.00 Current receivables 2781.00 3451.00 Inventories 4621.00 4921.00 Current operating assets 7402.00 8372.00 Current assets 8073.00 9154.00 Non-current financial assets 0.00 0.00 Long-term receivables 1498.00 1792.00 PP&E, net 6400.00 7900.00 = Non-current operating assets 7898.00 9692.00 = Non-current assets 7898.00 9692.00 Total assets 15971.00 18846.00 Note payable to the banks 719.00 219.00 Current financial liabilities 719.00 219.00 Accounts payable to suppliers 1976.00 2319.00 Current deferred revenue 1231.00 1345.00 Salary payable 612.00 592.00 = Current operating liabilities 3819.00 4356.00 = Current liabilities 4538.00 4575.00 Long-term debt 6534.00 5241.00 = Non-current financial liabilities 6534.00 5241.00 Long-term deferred revenue 987.00 1029.00 Long-term accrued warranties 1820.00 1400.00 : Non-current operating liabilities 2807.00 2429.00 = Non-current liabilities 9341.00 7670.00 = Total liabilities 13879.00 12245.00Paid-in capital 2000.00 6500.00 Retained earnings 92.00 101.00 Total equity 2092.00 6601.00 Total liabilities + Total equity 15971.00 18846.00 Balance sheet metrics Not useful Working capital: Current assets - Current liabilities Need for invested capital Current operating assets - Current operating liabilities Current net operating assets or the need for operating working capital 0.00 0.00 + Non-current operating assets - Non-current operating liabilities Non-current net operating assets or the need for fixed capital 0.00 0.00 Net operating assets or the need for invested capita 0.00 0.00 Source of invested capital Financial liabilities Less Financial assets = Net financial liabilities or net debt 0.00 0.00 Equity Invested capital Indirect GAAP cash flows Net income + Depreciation and amortization - Change in operating working capital - Change in non-current operating assets other than PP&E and intangibles + Change in non-current operating liabilities OCF 0.00 Capex Change in S.T. Investments 0.00 = ICF .00 Change in principal portion of debt Change in capital (Dividends) = FCP 0.00 = NCF 0.00 Enterprise free cash flows Enterprise free cash flow: Method 1 Operating income after tax; NOPAT; EBIAT; EBIT*(1-tax); Unlevered or prefinancing net income - Change in net operating assets Unlevered or enterprise free cash flowPaid-in capital 2000.00 6500.00 Retained earnings 92.00 101.00 Total equity 2092.00 6601.00 Total liabilities + Total equity 15971.00 18846.00 Balance sheet metrics Not useful Working capital: Current assets - Current liabilities Need for invested capital Current operating assets - Current operating liabilities Current net operating assets or the need for operating working capital 0.00 0.00 + Non-current operating assets - Non-current operating liabilities Non-current net operating assets or the need for fixed capital 0.00 0.00 Net operating assets or the need for invested capita 0.00 0.00 Source of invested capital Financial liabilities Less Financial assets = Net financial liabilities or net debt 0.00 0.00 Equity Invested capital Indirect GAAP cash flows Net income + Depreciation and amortization - Change in operating working capital - Change in non-current operating assets other than PP&E and intangibles + Change in non-current operating liabilities OCF 0.00 Capex Change in S.T. Investments 0.00 = ICF .00 Change in principal portion of debt Change in capital (Dividends) = FCP 0.00 = NCF 0.00 Enterprise free cash flows Enterprise free cash flow: Method 1 Operating income after tax; NOPAT; EBIAT; EBIT*(1-tax); Unlevered or prefinancing net income - Change in net operating assets Unlevered or enterprise free cash flowEnterprise free cash flow: Method 2 Operating income after tax; NOPAT; EBIAT; EBIT*(1-tax); Unlevered or prefinancing net income + Depreciation and amortization - Change in operating working capital - Change in non-current operating assets other than PP&E and intangibles + Change in non-current operating liabilities = OCF without interest Capex Unlevered or enterprise free cash flow Enterprise free cash flow: Method 3 EBIT + Depreciation and amortization = EBITDA - Tax on EBIT Change in operating working capital - Change in non-current operating assets other than PP&E and intangibles + Change in non-current operating liabilities OCF without interest 0.00 Capex Unlevered or enterprise free cash flow 0.00 Recasted cash flow statement Enterprise activities Reported OCF Interest paid, after tax Interest ( received), after tax = Unlevered OCF, i.e., OCF without interest 0.00 Reported ICF Increase (decrease) in investments of excess cash = Unlevered ICF = (Capex) 0.00 = Unlevered or enterprise free cash flow 0.00 Financial activities Interest (paid) net of tax benefit Principal borrowed (repaid) from financing cash flows A= (Payments) to debtholders 0.00 Capital received ( distributed) from financing cash flows Dividends (paid) from financing cash flows B= (Payments) to shareholders 0.00 Interest received net of taxes paid (increase) decrease in investments of excess cash (increase) decrease in cash needed for liquidity C= (Change) in financial assets 0.00 = Financial cash flows 0.00Enterprise free cash flow: Method 2 Operating income after tax; NOPAT; EBIAT; EBIT*(1-tax); Unlevered or prefinancing net income + Depreciation and amortization - Change in operating working capital - Change in non-current operating assets other than PP&E and intangibles + Change in non-current operating liabilities = OCF without interest Capex Unlevered or enterprise free cash flow Enterprise free cash flow: Method 3 EBIT + Depreciation and amortization = EBITDA - Tax on EBIT Change in operating working capital - Change in non-current operating assets other than PP&E and intangibles + Change in non-current operating liabilities OCF without interest 0.00 Capex Unlevered or enterprise free cash flow 0.00 Recasted cash flow statement Enterprise activities Reported OCF Interest paid, after tax Interest ( received), after tax = Unlevered OCF, i.e., OCF without interest 0.00 Reported ICF Increase (decrease) in investments of excess cash = Unlevered ICF = (Capex) 0.00 = Unlevered or enterprise free cash flow 0.00 Financial activities Interest (paid) net of tax benefit Principal borrowed (repaid) from financing cash flows A= (Payments) to debtholders 0.00 Capital received ( distributed) from financing cash flows Dividends (paid) from financing cash flows B= (Payments) to shareholders 0.00 Interest received net of taxes paid (increase) decrease in investments of excess cash (increase) decrease in cash needed for liquidity C= (Change) in financial assets 0.00 = Financial cash flows 0.00