注册 登录
上一主题：IPS questions with asset allocations
下一主题：Difference between Band 10 and Pass ?
返回列表 发帖
BC_MBA_student

Rank: 3Rank: 3

UID
223366 
帖子
475 
主题
101 
注册时间
2011-7-11 
最后登录
2016-4-18 
1# 跳转到 » 倒序看帖
打印
tT
发表于 2011-7-13 16:17 | 只看该作者

Increased int exp, effect on FCFF?

would, since, amount, increase
Thought this would increase FCFF since you're adding back a greater amount, but no effect per CFA text. Thanks.

 

相关主题：

. 2014CFA1级-每日一练-经济学-20140310

. Clarification: FRA - Pension

. Capitalization - Cash flow from Operations

. FSA: capitalization of interest and cost

. Stock Option Compensation Expense

收藏 分享

maryli

Rank: 2

UID
217999 
帖子
298 
主题
148 
注册时间
2011-5-25 
最后登录
2012-9-12 
2#
发表于 2011-7-13 16:17 | 只看该作者
FCFF is Free Cash Flow to Firm

It's the cash generation BEFORE any financing decisions. That is why you add back Interest because you want to know how much casn generation occurred even before the bond holders get paid interest.

TOP

Newhuman

Rank: 3Rank: 3

UID
217996 
帖子
345 
主题
185 
注册时间
2011-5-25 
最后登录
2012-9-12 
3#
发表于 2011-7-13 16:17 | 只看该作者
I suggest the best way to start looking at FCFF or FCFE through the EBIT formula.

FCFF = EBIT(1-t) + Dep - INVwc - INVcapex

Theoretically, FCFF should not change as an increase in Interest expense is simply eating away from NI, or equity. As such, FCFF should not change.

Hope this helps!

TOP

19831985

Rank: 2

UID
217799 
帖子
242 
主题
119 
注册时间
2011-5-24 
最后登录
2012-9-12 
4#
发表于 2011-7-13 16:17 | 只看该作者
The effect on fcfe is more likely to be asked.

You'd have to factor in net borrowing to and where the increase in interest came from.

TOP

giants2010

Rank: 2

UID
223409 
帖子
301 
主题
6 
注册时间
2011-7-11 
最后登录
2014-8-2 
5#
发表于 2011-7-13 16:17 | 只看该作者
jgrandits Wrote:
-------------------------------------------------------
> But due to the tax shield wouldn't some of the
> additional interest exp flow back to the firm?


NI = (Sales - COGS - int) (1-t)
NI = (Sales - COGS) (1-t) - int * (1-t)

Then FCFF = NI + int(1-t) + ...
FCFF = (Sales - COGS) (1-t) - int * (1-t) + int(1-t)

so you see you are subtracting after-tax interest then adding it back, so if you increase int exp or not, it doesn't matter.

TOP

返回列表
上一主题：IPS questions with asset allocations
下一主题：Difference between Band 10 and Pass ?