ACC306: Cash Flow Acccounting -Accounting Assignment

Internal Code: MAS6210

Accounting Assignment:

Question: A Discounted Cash Flow Valuation: General Mills, Inc. 1.General Mills reported $6, 192 million in short-term and long-term debt at the end of 2005 but very little in interest-bearing debt assets. Use a required return of 9 percent to calculate both the enterprise value and equity value for General Mills at the beginning of 2006 under two forecasts for long-run cash flows: a. Free cash flow will remain at 2009 levels after 2009. b. Free cash flow will grow at 3 percent per year after 2009. 2.General Mills had 369 million shares outstanding at the end of 2005, trading at $47 per share. Calculate value per share and a value-to-price ratio under both scenarios. a. The exercise involves calculating free cash flows, discounting them to present value, then adding the present value of a continuing value. For part (a) of the question, the continuing value has no growth Free Cash Flow for Kimberly-Clark Corporation a. The net payout to shareholders (dividends and share repurchases minus share issues) in 2007 was $3,405.9 million. Calculate free cash flow using Method 1 and Method 2. b. The firm reported cash flow from operation s of $2,429 million in its 2007 cash flow statement and also reported net interest payments of $142.4 million. It reported $898 million in cash spent on investing activities, but this was after including a net $56 million from liquidating short-term interest bearing securities. The firm's statutory tax rate is 36.6 percent. Calculate free cash flow from these reported numbers.