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Boomwichers, NV, a Dutch company financed by shareholders’ equity
only, decides, during the course of the 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 165 200 240 240 280 320
Operating outflows 165 175 180 185 180 190
Operating cash flows
Investments -200
FREE CASH FLOWS
Flows…
to creditors
to shareholders
 
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