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scarecrow

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发表于 2011-7-13 16:19 | 只看该作者
I doubt if depreciation belongs in FCInv, because when calculating FCFF you add in NCC explicitly.

FCInv = Net PPE (t) - Net PPE (t - 1) + Depreciation (t) ???

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tobeornottobe

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发表于 2011-7-13 16:19 | 只看该作者
You add Depreciation back explicitly to NI (or EBIT, EBITDA, etc) to account for the TAX benefit. So the net effect of adding back Depreciation is always = (tax)(Depreciation)

You still need to add it in your FCInv (IF you are given Net PPE) otherwise you understate how much you spent on PPE.

janardhanc Wrote:
-------------------------------------------------------
> I doubt if depreciation belongs in FCInv, because
> when calculating FCFF you add in NCC explicitly.
>
> FCInv = Net PPE (t) - Net PPE (t - 1) +
> Depreciation (t) ???



Edited 1 time(s). Last edit at Thursday, June 2, 2011 at 11:17AM by tiredofstudying.

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19831985

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发表于 2011-7-13 16:19 | 只看该作者
I have in my notes that you should be adding the value of non-operating assets (e.g. land held for investment) to the value obtained in a FCF model. So, for example, if using an FCFF model, you should take the firm value per share subtract out total debt to obtain equity value per share then add non-operating assets to arrive at an equity value per share.

Can anyone confirm this??

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ningning1984

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发表于 2011-7-13 16:19 | 只看该作者
OnToTheNextOne, I agree. Another grand twist.

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BelalM

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发表于 2011-7-13 16:19 | 只看该作者
^^^ Yup, you are right. I realized that after I wrote the behemoth original post. So watch out for:

Land Held for Investment
Investments
Excess Cash
Pension Fund Surplus

I think the only way this will come up is if they sneak a line item onto the BS that says "Non-Operating Assets" --- then you know, after you are done using FCFF or FCFE to value the firm, you have to add these non-operating assets to get the TOTAL value of the firm.

Intuitively it makes sense -- FCFF and FCFE are valuing the firm based on assets that produce cash flows (operating assets). So add back non-operating assets for total value.



Edited 1 time(s). Last edit at Thursday, June 2, 2011 at 03:05PM by tiredofstudying.

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madaochenggong

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发表于 2011-7-13 16:19 | 只看该作者
this deserves a bump up. great post, thanks for sharing, tiredofstudying.

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yospaghetti

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发表于 2011-7-13 16:19 | 只看该作者
Great post!

I am not sure if the below three items are NCCs. Shouldnt they be reported in I/S and / or B/S?

Unrealized Gains or Losses on HFT Instruments => reported in I/S
Inventory Write Downs => loss added to COGS, WD subtracted from inventory
Asset Impairments => I/S and B/S

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kickthatcfa

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发表于 2011-7-13 16:19 | 只看该作者
All NCCs are going to pop out on the cash flow statement. This statement is your friend -- go there first.

- Inventory mark-downs may not show up separately on the cash flow statement, but the net change in inventory will (and that's all you care about).

- Unrealized gains/losses on HFT securities and impairments will be readily apparent on the cash flow statement and quite possibly the income statement.

Keep an eye on the footnote disclosures. There might be some critical piece of information there.



madamesoleil Wrote:
-------------------------------------------------------
> Great post!
>
> I am not sure if the below three items are NCCs.
> Shouldnt they be reported in I/S and / or B/S?
>
> Unrealized Gains or Losses on HFT Instruments =>
> reported in I/S
> Inventory Write Downs => loss added to COGS, WD
> subtracted from inventory
> Asset Impairments => I/S and B/S

- Robert

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