标题: Land - two questions [打印本页] 作者: ruchita 时间: 2011-7-13 16:48 标题: Land - two questions
1) Land is considered a sunk cost in CF. Why do we need to add it back to Free cash flow along with excess cash and marketable securities as suggested in Schweser (p 185, book 3)?
2) When calculating goodwill, is land a identifiable tangible asset?
Thanks.作者: giorgio10 时间: 2011-7-13 16:48
For question 2, i think you write land up to fair value since it is a tangible asset. I don't think you can depreciate any it.作者: luda002 时间: 2011-7-13 16:48
1. because the land does not contribute to FCFF, therefore valuing the firm using a FCFF model results in the same value if land is held or not. Basically the firm could sell the land and not affect firm value (FCFF model), so it should be added to the calculated value.
Same with Cash, say a firm had $1B sitting there, it is not really contibuting to FCFF and therefore firm value. Thus you need to add it to the valuation to get the real value of the firm.
2. Yes.作者: yodacaia 时间: 2011-7-13 16:48
justinkc Wrote:
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> For question 2, i think you write land up to fair
> value since it is a tangible asset. I don't think
> you can depreciate any it.
Yup. You can never depreciate land.作者: spreads 时间: 2011-7-13 16:48
scar do you remember what we add back to BV for residual income. I think something like operating leases and some other things. I think i remember you don't add back AR securitizations because both asset and liability are gone? not sure, it didn't make sense to me.
