Problems in Cash Flow Management

JIMS C-702 Ankur Wahal

Problem 1
A term loan of 300 Cr pays an interest rate of (3.25% spread, with base rate of 9.25% p.a). Suppose that the expected FCFF for the first seven years of project life are the following:
Year FCFF 1 100 2 105 3 107 4 107 5 105 6 105 7 105

Show the debt Schedule with: 1. Equated 2. Structured Repayment schedules

Problem 2
Project value 100 cr. Equity 15% and debt 85% Capex 4 installments 250 cr. at the end of each year in periods 1-4 The debt is further divided into the following structure: Senior Debt 100% with repayments in 10 years and interest rate of 7% Subordinate Debt 0% with repayments in 5 years and interest rate of 12% The Project will generate steady cash flow of 14 cr. for the project life Prepare the FCFE available for the equity shareholders

Problem 3
Project value 100 cr. Equity 15% and debt 85% Capex 4 installments 250 cr. at the end of each year in periods 1-4 The debt of 85% is further divided into the following structure: Senior Debt 75% with repayments in 10 years and interest rate of 7% Subordinate Debt 10% with repayments in 5 years and interest rate of 12% The Project will generate steady cash flow of 14 cr. for the project life Prepare the FCFE available for the equity shareholders

Problem 4
Project value 100 cr. Equity 15% and debt 85% Capex 4 installments 250 cr. at the end of each year in periods 1-4 Working Capital requirement is 3% of the Project Cost and bears an interest of 7% The debt of 85% is further divided into the following structure: Senior Debt 75% with repayments in 10 years and interest rate of 7% Subordinate Debt 10% with repayments in 5 years and interest rate of 12% The Project will generate steady Profits of 14 cr. for the project life Prepare the FCFE available for the equity shareholders

Problem 5
A project whose value is 200 cr. starts operations at T0. The Term Loan Project is 100 cr. 5% fixed rate is amortized in constant Principal repayment of 5 years. Tax rate is 30%. Calculate: Net income and cash flows for the sponsors in the 5 years of operating life, considering that the first 5 years of Project will generate EBITDA of 7.5 cr p.a. Calculate the IRR.

Problem 6
The revenue and operating costs for a Project of 4000 cr are given below:

0 Rev Op costs

1 1125 175

2 1175 175

3 1225 175

4 840 175

5 855 175

6 865 175

7 885 175

8 895 175

9 925 175

10 925 175

The depreciation schedule is as follows:

0 Dep 1 20% 2 20% 3 20% 4 10% 5 10% 6 10% 7 10%

Debt Equity ratio is 80:20, with debt repayment is equated for 10 years with bearing base interest rate of 7% with 3% spread. The tax rate is 33%

Prepare the income statement and the cash flows and calculate the IRRs

Problem 7
A Special Purpose Vehicle starts in T0 a 5,000 cr. project, financed with a D/E ratio of 1:1. Interest rate on the loan is floating rate but swapped against a 10% fixed interest rate. The schedule of payments during construction is the following:

Year 0 Year 1 Year 2 Year 3

10% 25% 40% 25% 100%

Every payment during the construction period is financed based on the agreed D/E ratio. The amortization of the outstanding loan at the end of year 3 starts at the end of year 4 and will be completed at the end of year 8 according to the following percentages of principal repayment:

Year End
Based on the information provided, calculate: 1. the outstanding amount of the loan at the end of year 3; 2. the amortizing schedule of the loan during the period 4-8 Assuming from the operating year the company generates a steady cash flow of about 1000 cr. For next 5 years. Then Calculate the IRR.

4 5 6 7 8

15% 15% 20% 20% 30% 100%