FCINV, net investment or not???? net, remember, afternoon, investment, only

dvilayphet

So typically the "real world" calculation for FCF uses FCINV as "CAPEX", or the expenditure on fixed assets. It does not net out the disposition of fixed asset.


However in the text i remember reading multiple times about fixed capital investment being netted with dispositions of fixed assets.

Then on the afternoon mock in 2009, it asks for FCF, provides both investment in fixed assets and sales of fixed assets under the CFI section, and only uses investment.

So wtf, which one do they want us to use?

CPATrader

if a specific outlay is given, per the exam in the notes section use it. if given a B/S use change in gross fixed assets, if given a CF statement use that years investment

wizofoz

I think I read something about this somewhere here, try to search forum.

needhelp1700

My understanding is that FCInv = capex - sale of LT assets = change in gross PPE - sale of LT assets



so if you are given a B/S, you have to take gross assets2009 - gross assets 2008 to arrive at capex, then look for sale of LT assets and subtract them out.

if you are just given capex, that is already representing the change in gross assets so no need to take any delta.

luda002

now a question...

what if you are provided Net PPE?

CP

RMontgomery

add depreciation to get gross PPE

mp3bu

nope

you do
change in Net PPE + Depreciation Expense = Capex...

CP

eoin

yea.

i meant for each year take the Net PPE + dep. then take the delta, which gives you capex. so same thing.

llxx

You will not be given depreciation for the two years... you will be given Balance sheet for two years, and depreciation in the income statement for current period...

just so you are thinking straight!

CP

SeanWest

Well then the mock is wrong, which i suspected.