Boomwichers NV, a Dutch company financed by shareholders” equity only, decides, during the course of year n, to finance an investment project worth €200m using shareholders” equity (50%) and debt (50%). The loan it takes out (€100m) will be paid off in full in n+5, and the company will pay 5% interest per year over the period. At the end of the period, you are asked to complete the following simplified table (no further investments are to be made):
|
Period |
n |
n+1 |
n+2 |
n+3 |
n+4 |
n+5 |
|
Operating inflows |
165 |
200 |
240 |
280 |
320 |
36o |
|
Operating outflows |
165 |
175 |
i8o |
185 |
180 |
190 |
|
Operating cash flows |
||||||
|
Investments |
-200 |
|||||
|
Free cash flows |
||||||
|
Flows … |
||||||
|
… to creditors |
||||||
|
. . to shareholders |
What do you conclude from the above?