Credit Mechanism of Rbb

In: Business and Management

Submitted By gkbhai
Words 627
Pages 3
Question 1-a
Calculation of the free cash flow for each year in the following 5 years using:
FCF=OCF-NCS-ΔNWC = EBIT (1-tax rate)+ Depreciation-NCS-ΔNWC

Calculation of Free Cash Flow in $ Million | | 2013 | 2014 | 2015 | 2016 | 2017 | EBITDA | 530.40 | 549.74 | 567.77 | 584.25 | 598.95 | Less Depreciation | 60.00 | 60.00 | 60.00 | 60.00 | 60.00 | EBIT | 470.40 | 489.74 | 507.77 | 524.25 | 538.95 | Less Interest | 50.00 | 50.00 | 50.00 | 50.00 | 50.00 | EBT | 420.40 | 439.74 | 457.77 | 474.25 | 488.95 | Less Tax | 126.12 | 131.92 | 137.33 | 142.27 | 146.68 | EAT (Net Income) | 294.28 | 307.82 | 320.44 | 331.97 | 342.26 | NOPAT | 329.28 | 342.82 | 355.44 | 366.97 | 377.26 | Add Depreciation | 60.00 | 60.00 | 60.00 | 60.00 | 60.00 | Less Capita Expenditure | 133.57 | 136.95 | 140.11 | 142.99 | 145.57 | Less Changes in working Capital | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | Free Cash Flow | 255.71 | 265.86 | 275.33 | 283.98 | 291.70 | Earnings Per Share in Cents | 58.856 | 61.56338 | 64.08747 | 66.39462 | 68.45286 | Dividends Per Share in Cents | 44.142 | 46.17253 | 48.06561 | 49.79597 | 51.33964 | Growth Rate in Earning Per Share | 0.051 | 0.046 | 0.041 | 0.036 | 0.031 |

From 2013, every year’s data is calculated depending on the previous year. So, we take 2013’s data as an example. Firstly, we need to estimate the net income and then from bottom to top to calculate EBIT. Since growth rate of earning per share in 2013, is 5.1% and the earning per share in 2012 was 56 cents. So, the earning per share in 2013 is 56(1+5.1%) = 58.856 cents.

Given that the firm has 500 million shares outstanding, the net income2013 = (500×earning per share)/100 = 294.28 million dollars. The tax rate is given by 30%, the depreciation, EBITDA-EBIT=60 million, will remain unchanged for following years, so the EBIT 2013 = (Net income) / (1-0.3) + 60+50…...

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