Using the Final Project Excel Workbook, compute the following time value of money figures:

1. Calculate the present value of the company based on the given interest rate and provided Free Cash Flows for the years 2015, 2016, and 2017.

2. Suppose the risk of the company changes based on an unanticipated decrease in the Free Cash Flows by 10% annually during the years 2015, 2016, and 2017. Recalculate the present value of the company.

3. Suppose that a potential buyer has offered to buy this company in three years. Based on the initial present value you calculated above in A1, what would be a reasonable amount for the buyer to pay for the company in three years' time? Enter your answer and justify your reasoning in the Word document.

DATA from Excel Workbook:

Milestone 1: Time Value of Money (please fill in YELLOW cells) Explanations: Interest Rate 8%

FCF (Free Cash Flows)is the net change in cash generated by the operations of a business during a reporting period, minus cash outlays for working capital, capital expenditures, and dividends during the same period. This is a strong indicator of the ability of an entity to remain in business.

Note: For Milestone 1, please use the Free Cash Flows from the United Parcel Service 2017 Annual Report for the years 2015, 2016, and 2017 located on Page 2 of the Report.

FCF - Years FCF - 2015 FCF - 2016 FCF - 2017

Amounts* 3,573.00 6,007.00 6,082.00

-10% 3,215.00 5,406.00 5,474.00

Pv* (3,308.33) (5,150.03) (4,828.09)

Total Pv* (13,286.46) *In millions

Pv=FVN/(1+I)^N PV(I,N,0,FV) * The PV is NOT a negative number.

Interest Rate (given) - For purposes of this exercise, use 8% interest rate (Given)

It is a posiive number. This negative values calculated her are a result of the PV formula only.