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Acc306 Individual Assignment-Q

The document provides instructions for an individual assignment. It requires students to answer two calculation questions, one from Chapter 4 on discounted cash flow valuation and the other from Chapter 11 on free cash flow. It provides details on formatting, referencing, submission process through Turnitin, and the deadline.

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Shoaib Ahmed
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© © All Rights Reserved
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Download as DOCX, PDF, TXT or read online on Scribd
134 views

Acc306 Individual Assignment-Q

The document provides instructions for an individual assignment. It requires students to answer two calculation questions, one from Chapter 4 on discounted cash flow valuation and the other from Chapter 11 on free cash flow. It provides details on formatting, referencing, submission process through Turnitin, and the deadline.

Uploaded by

Shoaib Ahmed
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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ACC306 Individual Assignment

Requirement:
Two calculation questions, one is from Chapter 4, the other is from chapter 11, 10 marks each, in
total 20 marks.

Font size is 12, 1.5-line space.


Harvard reference system
Due time is at 5pm on Friday in week 10 26/01/2018, no extension will be given. One day late,
10% deduction on your assignment until zero.
Similarity rate must be lower than 20%, otherwise you will receive penalty, over than 40%, you
will receive zero mark.
You must register your own account with turn-it-in, after you log in, you use the following
information to submit your assignment.
Turnitin Assignment Submission:
Class ID: 16886287
Password: ACC306
To submit your assignment, please use the class ID and password to enrol the subject on
Turnitin.
http://turnitin.com/
If you have any questions, please send email to me [email protected]
Wechat: zjun2285
Nathan Zhang

Chapter 4: A Discounted Cash Flow Valuation: General Mills, Inc. (10 marks)
At the beginning of its fiscal year 2006, an analyst made the following forecast for General
Mills, Inc., the consumer foods company, for 2006-2009 (in millions of dollars):
2005 2006 2007 2008 2009
Cash flow from operations 2,014 2,057 2,095 2,107
Cash investment in operations 300 380 442 470
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.
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:

Chapter 11: Free Cash Flow for Kimberly-Clark Corporation (10 marks)
Below are summary numbers from reformulated balance sheets for 2007 and 2006 for Kimberly-
Clark Corporation, the paper product s company, along with numbers from the reformulated
income statement for 2007 (in millions of dollars).
2007 2006
Operating assets $18, 057.0 $16,796.2
Operating liabilities 6 , 011.8 5,927.2
Financial assets 382.7 270.8
Financial obligations 6,496.4 4,395.4
Operating income (after tax) $2,740.1
Net financial expense (after tax) 147.1

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.

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