CFAI Moch: Afternoon Q51 first, 2010, different, change, error

MonkeyBusiness

Use the data in charts to calc calculate FCFE:
There’s a bunch of different ways to get there, I like to get FCFF first then go to FCFE. They want to do it different and go from EBITDA - thats fine too.
FCFE = EBITDA(1-tax rate) + Dep (tax rate) - FCinv - WCinv + Net Borrowing
First error:
Calculating WCinv. You have to calc the change year over year, but you dont count changes in cash, or changes in notes payable (ref R43 p 406). They simply did 2010 CA-CL minus 2009 CA-CL and got 3.30. I think you should get 1.8, as AR increases 11.5 (use) Inventory increases 17.2 (use) and AP increases 30.5 (source). All together thats a net USE of cash of 1.8.
Second error:
Calculating Net Borrowing:
Usually this would just be given on the cash flow statement, but not today. You see that y/y LTD increased by 7.5 and Notes Payable increased by 5. This means we borrowed 7.5+5=12.5…. CFAI for some reason decided to subtract and did 7.5-5=2.5
Did any one else pick up on these errors. Are there other errors in the Moch you’ve noticed?
Matt

ayodayo

**** PLEASE DISREGARD FIRST MESSAGE ****
WCinv is a net SORUCE of cash not USE.
**** PLEASE DISREGARD FIRST MESSAGE ****
Use the data in charts to calc calculate FCFE:
There’s a bunch of different ways to get there, I like to get FCFF first then go to FCFE. They want to do it different and go from EBITDA - thats fine too.
FCFE = EBITDA(1-tax) + Dep (tax) - Interest(1-tax) - FCinv - WCinv + Net Borrowing
First error:
Calculating WCinv. You have to calc the change year over year, but you dont count changes in cash, or changes in notes payable (ref R43 p 406). They simply did 2010 CA-CL minus 2009 CA-CL and got 3.30. I think you should get 1.8, as AR increases 11.5 (use) Inventory increases 17.2 (use) and AP increases 30.5 (source). All together thats a net SOURCE of cash of 1.8.
Second error:
Calculating Net Borrowing:
Usually this would just be given on the cash flow statement, but not today. You see that y/y LTD increased by 7.5 and Notes Payable increased by 5. This means we borrowed 7.5+5=12.5…. CFAI for some reason decided to subtract and did 7.5-5=2.5
FCFE = EBITDA(1-tax rate) + Dep (tax rate) - Interest(1-tax) - FCinv - WCinv + Net Borrowing
= 275(.65) + 82.5(.35) - 16(1-0.35) - 165.3 - (-1.8) + 12.5
= 178.75 + 28.87 -10.38 - 165.3 + 1.8 + 12.5
= 46.24
46.24/50 = .92 – I guess I’d go with C.
Does this upset anyone, it grinds my gears. Are there other errors in the Moch you’ve noticed?
Matt