Reading 42: Free Cash Flow Valuation- LOS i～ Q1-3 capital, interest, valuation, investment, net

wzaina

 

LOS i: Critique the use of net income and EBITDA as proxies for cash flow in valuation.

Q1. Assuming that the investment in fixed capital and working capital offset each other, free cash flow to the firm (FCFF) may be proxied by net income if:

A)   earnings before interest and taxes (EBIT) equals depreciation.

B)   non-cash charges and interest charges are equal.

C)   non-cash charges and interest charges are zero.

 

Q2. If the investment in fixed capital and working capital offset each other, free cash flow to the firm (FCFF) may be proxied by:

A)   earnings before interest and taxes (EBIT).

B)   after-tax EBIT plus non-cash charges.

C)   net income plus after-tax interest.

 

Q3. If the investment in fixed capital and working capital offset each other, free cash flow to the firm (FCFF) may be proxied by:

A)   net income plus non-cash charges plus after-tax interest.

B)   earnings before interest and taxes (EBIT).

C)   net income plus after-tax interest.

fengleng

thanks

vanisacarlton

thanks

梅子绿茶

 aa

沙胖胖

thanks

沙胖胖

thanks

powerhql

Thank you, let me have a look, please!

suodi

[em50]

aylst

dfdf

Michjay

thx