King Saud University Merck & Co Free Cash Flows and NPV Worksheet

Question Description

I’m working on a business case study and need a sample draft to help me understand better.

Set up the timeline and computation of free cash flow in separate, contiguous columns for each year of the project life. Be sure to make outflows negative and inflows positive.

a.Assume that the project’s profitability will be similar to XXX’s existing projects in 20xx and

estimate (revenues – costs) each year by using the 20xx EBITDA/Sales profit margin. Calculate EBITDA as EBIT + Depreciation expense from the cash flow statement.

Use Excel to determine the NPV of the project with a 12% cost of capital. Also calculate the IRR
Perform a sensitivity analysis by varying the project forecasts as follows:
- Suppose first year sales will equal 2%-4% of XXX’s revenues.
- Suppose the cost of capital is 10%-15%.

of the project using Excel’s IRR function.

Suppose revenue growth is constant after the first year at a rate of 0%10%

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