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COPPER

Minera Las Piedras of Chile


Please sit close to your own group, as we will do a GAME
Statement of Cash Flows

Assets Go Up > Cash Out Liabilities Go Up > Cash In


Assets Go Down > Cash In Liabilities Go Down > Cash Out

(What You Own) (What You Owe)

Assets Balance Sheet Liabilities


Cash Payables
Receivables Accruals
Inventory Bankloans
CURRENT ASSETS 500 CURRENT LIABILITIES 400
Buildings Debts (Bonds)
Property Plant & Equipm Equity * (Stocks / Shares)
LONG-TERM ASSET 500 LONG-TERM LIABILITIES 600

TOTAL ASSETS 1,000 TOTAL LIABILITIES 1,000

* Equity = 4 Parts (Common Stocks, Preferred Stocks, APIC, Retained Earnings (from Income Statement)
S-C-V of the COPPER Case: “Seamless
Collaboration” > how and when to achieve? > Time
dimension
Situation (case situation)
The financial leadership had an unusual problem: the company had
too much money. The company had earned $500 million more than
S expected, and as a result is now exploring its alternative uses for the
funds. Although all agreed it was a nice problem. It still presentented
financial leadership with a rather complex set of choices of how and
where to invest or ditribute these new-found riches.
+ Challenge (case issue to be solved)

C
=
Value Proposition (how to provide solutions )

V
Terms
Changes in NOWC (AR , Inty, AP)
= movements in Net Operating Working Capital
= Short-term investment: Receivables, Inventory, Accounts Payables

Capex = Capital Expenditures: Long-term investments: a) Existing replacement and b) New investments

DPR = Dividend Pay Out Ratio = (Dividend / Net Income) * 100%

Divided Growth = [(dividend this year – dividend previous year) / dividen previous year ] * 100%

Please decide on the distribution of the excessive cash among


the stakeholders, think about justification and fairmess using the
Actuals of 2004 as basis, and prepare Estimation proposal for 2005.

PS. Assume i$ = 600 Chilean Peso


Statement of Cash Flow
2004 Actual 2005 Estimation
Net Income 786.4 1,024.8
Depreciation & Amortization (77.6) (71.2)
Deferred Taxes (162.9) (209)
Changes in NOWC (AR , Inty, AP) (79)
Operating Cash Flow (OCF) 947.9
Capex: Replacements (81.5) 384 / 4 = 96
Capex: New Investments - 500
Investing Cash Flow (ICF) (81.5)

Free Cash Flow (FCF) ???


Repayment of Loans (118.8)
Dividend discretion (242)
Financing Cash Flow (FCF) (360.8)

Beginning Cash Balance 23


Increase (decrease) in Cash 505.6
Ending Cash Balance 528.6

DPR (Dividend Payout Ratio) 242/786.4 = 31%


Dividend Growth (vs. previous period) 242/203.7 = 19%
Statement of Cash Flow
Options Focus Area Who Benefits?
# 1 : Capacity Expansion
# 2 : Dividends
# 3 : Debt Reduction
# 4 : Joint Venture
# 5 : Nada
# 6 : Bonus to Employees
500 x 1 million pesos p/e

Conclusion – which one is the best and why? (state some reasons)
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