金融代写|FM302 Corporate Finance

1 What are the four basic cycles of a company?
2/Why do we say that financial flows are the flip side of investment and operating flows?
3/Define operating cash flow. Should the company be able to spend this surplus as it likes?
4/Is operating cash flow an accounting profit?
5/Why do we say that, as a general rule, operating cash flow should be positive? Provide a simple example that demonstrates that operating cash flow can be negative during periods of strong growth, start-up periods and in the event of strong seasonal fluctuations.
6/When a cash flow budget is drawn up for the purposes of assessing an investment, can free cash flows be negative? If so, is it more likely that this will be the case at the beginning or at the end of the business plan period? Why?
7/Among the following different flows, which will be appropriated by both shareholders and lenders: operating receipts, operating cash flow, free cash flows? Who has priority, shareholders or lenders? Why?
8/A feature of a supermarket chain such as Tesco in the UK or the Dutch retailer Ahold is a very fast rotation of food stocks (six days), cash payments by customers, long supplier credit periods ( 60 days) and very low administrative costs. Will the operating cycle generate cash requirements or a cash surplus?
9/Should the cash outflows of launching a new perfume be considered as an operating outlay or an investment outlay?
10 /How is an investment decision analysed from a cash standpoint?
11/After reading this chapter, can you guess how to define bankruptcy?
12/Is debt capital risk free for the lender? Can you analyse what the risk is? Why do some borrowers default on loans?
More questions are waiting for you at www.vernimmen.com.

1/Boomwichers NV, a Dutch company financed by shareholders’ equity only, decides, during the course of year $n$, to finance an investment project worth $€ 200 \mathrm{~m}$ using shareholders’ equity $(50 \%)$ and debt $(50 \%)$. The loan it takes out $(\epsilon 100 \mathrm{~m})$ will be paid off in full in $n+5$, and the company will pay $5 \%$ interest per year over the period. At the end of the period, you are asked to complete the following simplified table (no further investments are to be made):
\begin{tabular}{|c|c|c|c|c|c|c|}
\hline Period & $n$ & $n+1$ & $n+2$ & $n+3$ & $n+4$ & $n+5$ \
\hline Operating inflows & 165 & 200 & 240 & 280 & 320 & 360 \
\hline Operating outflows & 165 & 175 & 180 & 185 & 180 & 190 \
\hline \multicolumn{7}{|c|}{ Operating cash flows } \
\hline Investments & -200 & & & & & \
\hline \multicolumn{7}{|c|}{ Free cash flows } \
\hline \multicolumn{7}{|l|}{ Flows … } \
\hline \multicolumn{7}{|l|}{$\begin{array}{l}\text {… to creditors } \
\text {… to shareholders }\end{array}$} \
\hline
\end{tabular}
What do you conclude from the above?

2/Ellingham plc opens a Spanish subsidiary, which starts operating on 2 January 2014. On 2 January 2014 it has to buy a machine costing $€ 30 \mathrm{~m}$, partly financed by a $€ 20 \mathrm{~m}$ bank loan repayable in instalments of $€ 2 \mathrm{~m}$ every 15 July and 15 January over 5 years. Financial expenses, payable on a half-yearly basis, are as follows:
\begin{tabular}{ccccccccccc}
\hline 2014 & & \multicolumn{2}{c}{2015} & & \multicolumn{2}{c}{2016} & & 2017 & & \multicolumn{2}{c}{2018} \
\hline June & Dec & June & Dec & June & Dec & June & Dec & June & Dec \
1 & 0.9 & 0.8 & 0.7 & 0.6 & 0.5 & 0.4 & 0.3 & 0.2 & 0.1 \
\hline
\end{tabular}
Profits are tax free. Sales will be $€ 12 \mathrm{~m}$ per month. A month’s inventory of finished products will have to be built up. Customers pay at 90 days.

The company is keen to have a month’s worth of advance purchases and, accordingly, plans to buy two months’ worth of supplies in January 2011. Requirements in a normal month amount to $€ 4 \mathrm{~m}$.
The supplier grants the company a 90-day payment period. Other costs are:

• personnel costs of $€ 4 \mathrm{~m}$ per month;
• shipping, packaging and other costs amounting to $€ 2 \mathrm{~m}$ per month and paid at 30 days. These costs are incurred from 1 January 2014.
  Draw up a monthly and an annual cash flow plan.
  How much cash will the subsidiary need at the end of each month over the first year? And if operations are identical, how much will it need each month over 2015? What is the change in the cash position over 2015 (no additional investments are planned)?