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FCFF Questin

What is the company's FCFF?

Net income = 1,204
Depreciation/Amort = 293
Decrease working capital = 36
Interest Expense = 290
Additions to PP&E = 1,317
Disposition of PP&E (from cash flow statement) = 65
Tax Rate = 35%

This question drove me crazy. The answer is 404.5 = 1,204 + 293 + 36 + (290*.65) - 1317

Why do you not add back the 65. Shouldn't the FCInv be net of asset sales?

anyone have the 2009 errata?

TOP

or you could just add the total CFI in this example. it is from the 2009 Mock

TOP

CP shdn't we add the net amount ((65 sale price less BV (0)) * 1-.35)

i.e 446.75 instead of 469.5

TOP

no... you add the entire investment (or sale value). No adjustment for taxes.

CP

TOP

If the question included BV's etc it seems like you would be right. If not specified, I wouldn't make that assumption and I would go with CPs answer.

How do you have the 2009 Mock? (or...how do i get it???)

TOP

if this was a 2009 mock question - there was an erratum on it -- they had forgotten to include it. However this was the only answer choice provided.

1204 + 293 + 36 -1317 + 290 (1-0.35) + 65 = 469.5 <-- this is the right answer.

CP

TOP

Ok it was the 2009. Is the 2009 errata still accessible?

TOP

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