Study Session 11: Equity Investments: Free Cash Flow and Other Valuation Models
Hi Does anyone know if following should be included in net working capital calculation for FCFF?
1) Deferred Tax and liabilities
2) other investments included in Current assets below cash & cash equivalents
3) Deferred income
please help a fellow candidate out! Your help will be much appreciated! Thanks
Do expected spot rates ALWAYS have to be BELOW current forward rates? Can they be above?
What i’m asking is.. when riding the yield curve = does it only refer to going LONG on a bond? You cannot go short in “riding the yield curve” ?
Hi guys, I have a question with Mendosa case - Question 6.
The answer said “residual income in year 5 = 5.4*1.155”.
I don’t understand why we need to multiply 1.155, rather than 1.154?
The residual income in Year 1 = Book value of equity in year 0 * (ROE - r)
Please give me some hints.
Quinton Johnston is evaluating NYL Manufacturing Company, Ltd. In 2017, when Johnston is performing his analysis, the company is unprofitable. Furthermore, NYL pays no dividends on its common shares. Johnston decides to value NYL Manufacturing by using his forecasts of FCFE. Johnston gathers the following facts and assumptions:
The company has 17.0 billion shares outstanding.
Sales will be $5.5 billion in 2018, increasing at 28 percent annually for the next four years (through 2022).
While calculating FCFF we add back after tax interest to it ( + int(1-t) ). By definition FCFF is the cash available to providers of the capital i.e equity holders and bond holders. So, shouldn’t we add back the whole interest to FCFF? Why don’t we include the benefit of tax saving due to interest in FCFF calculation?
(Eg: Let’s say there’s an owner, an equity holder, a bond holder, and a tax official standing side by side. The owner now distributes money to each of these in the following manner.
EBIT =100 ,
interest = 10 ( to bondholder)
I have a question regarding the calculation/timing of the terminal value. I searched through old AnalystForum threads, but could not find a concise answer.
Can anyone help derive the formula for DLOC
DLOC = 1 - (1/(1+control premium))
Does anyone have an intuitive explanation of why clean surplus has to hold for residual income valuation? What happens conceptually if the clean surplus does not hold in terms of valuation? Thanks!
Could someone help me understand how to calculate change in working capital investment. I understand, the formula is CA - CL in recent year and subtract last year’s CA - CL. I am getting confused with the addition and subtraction when Accounts Receivables increase or decrease and when Accounts Payable increase or decrease.
Study together. Pass together.
Join the world's largest online community of CFA, CAIA and FRM candidates.