Aswath Damodaran 249
An Incremental CF Analysis
0 1 2 3 4 5 6 7 8 9 10
Net Income 9 , 933 20 , 171 29 , 500 37 , 213 39 , 896 35 , 523 35 , 874 36 , 244 BR 3 6 , 634 BR 37 , 044 BR
+ Depreciation &
Amortization 35 , 000 28 , 000 22 , 400 17 , 920 14 , 336 21 , 469 21 , 469 21 , 469 21 , 469 21 , 469
- Capital Expenditures 250 , 000 0 0 0 0 50 , 000 0 0 0 0 0
- Change in Working
Capital 35 , 100 2 , 700 2 , 700 2 , 250 0 0 0 0 0 0
- Principal Repayments 7 , 858 8 , 271 8 , 705 9 , 162 9 , 643 10 , 149 10 , 682 11 , 243 11 , 833 12 , 454
- Salvage Value of Assetsb^117 , 750
Cashflow to Equity ( 185 , 100 ) 34 , 375 37 , 201 40 , 945 45 , 971 ( 5 , 411 ) 46 , 842 46 , 661 46 , 470 46 , 270 163 , 809
This converts the equity earnings on the previous page into cash flows to equity.
Note that we reduce the initial investment by the new debt (since it reduces the
equity investment needed).
The real cash flows to equity are discounted at the real cost of equity to arrive at
a NPV (which should be the same in real and nominal terms)
FCFE : Free Cash Flow to Equity. This measures the cash flow left over for
equity investors after all needs on this project are met, including debt payments
and capital expenditures.
