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# Cash flow, uncertainty, euros

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You have bid for a possible export order that would provide a cash inflow of ?1 million in six months. The spot exchange rate is \$1.2375 = ?1 and the six-month forward rate is \$1.2318 = ?1. There are two sources of uncertainty: (1) the euro could appreciate or depreciate and (2) you may or may not receive the export order. Illustrate in each case the final payoffs if (a) you sell one million euros forward, and (b) you buy a six-month option to sell euros with an exercise price of \$1.2318/?.

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(a) you sell one million euros forward

Under forward contract, no matter whether I will receive or not receive the export order, I have to sell one million euros. If I do not receive the export order, I will have to buy euros at the spot rate and sell at the forward rate. If I receive the export order, instead of selling at the spot rate, I will have to sell at ...

#### Solution Summary

This solution is comprised of a detailed explanation to illustrate in each case the final payoffs for forward and option transaction.

\$2.19
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## Dell analysis of cash provided by operating activities, fred cash flow, dividends

See attached files.

Case 7-1
Analysis of Cash Flows

Refer to the annual report of Dell in Appendix A:

Required:
a. Explain how the following items create differences between Dell's earnings from continuing operations and its net cash provided by operating activities:
(1) Depreciation and amortization
(2) Change in deferred taxes
(3) Decrease in receivables
(4) Decrease in inventories
b. Explain why net income is much less than cash from operations in 2005.
c. Calculate Dell's free cash flows for each of the past three years.
d. How has Dell used its free cash flows during the past three years?
e. How much cash has Dell returned to shareholders during each of the past three years and in total?