The structure necessary to calculate cash flows is available in the course material slides.
There are two ways to calculate cash flows.
Considering the financial structure of the firm levered cash flow and independently from the financial
structure of the firm on levered cash flow here we will calculate on levered cash flows as our main
focus is enterprise value rather than the specific financial structure of the firm let's create the
structure of the sheet.
We will start from Egbert and then we will have operating taxes these taxes are modeled as a percentage
of Egbert.
The reason to model taxes as a percentage of Ebert is that we do not want to take into consideration
tax shields provided by interest expenses.
Remember we are trying to find the value of the company without taking into consideration its financial
structure.
The amount of tax shields is an element which depends on the financial structure of a firm and therefore
should not be considered once we have taken into consideration operating taxes.
We arrive at no part which stands for net operating profit after taxes.
It is a subtotal given by the sum of it and operating taxes
below no part will have to add depreciation and amortization in order to obtain gross cash flow
afterwards.
We should consider the investments in the three working capital elements that we saw before inventory
trade receivables and trade payables.
This leads us to another subtotal investments in working capital given by the sum of the three items
above next to it.
We will consider the investments in other assets and other liabilities necessary for the growth of the
business
remember each of these items was modeled before hand weights for us in the output balance sheet next.
I'll leave this small blank row because we will consider the group of fixed assets investments it includes
capital expenditures investments in PND and the so-called other investments item comprising intangible
and financial assets in order to reconcile historical cash flow movements will add extra ordinary items.
We have all the necessary elements for the calculation of unleavened free cash flow.
Let's format a USCF line as a total and we are ready.