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Level II

Calculating FCFF from EBIT - Interest Tax Shield

In the notes, the formula for arriving FCFF from EBIT is as followings:

FCFF = [EBIT X (1 - Tax Rate)] + Dep - FCInv - WCInv

  • FCFF = Free cashflow to the firm
  • EBIT = Earnings before interests and taxes
  • Dep = Depreciation
  • FCInv = Capital investments
  • WCInv = Working capital investments

The point I do not get from this formula is that why is not the tax shield from paying interest being added back. It is a real benefit to the firm.


Binomial Tree Equity

Hi Guys,

I was solving the problem of the curriculum (Reading 35, question 13) and I don’t get the answer..

There is a Bond, with maturity 2Y and a coupon of 2,5% and they ask for the price in the upper node  in T1.

According to what I understand. this is calculated as 2,5 (coupon in T1) + 102,5/1,028853 (coupon + principal in T2) which is 102,1255. The correct answer according to the curriculum is 99,6255, which is just 102,5/1,028853.. so they don’t add the coupon of T1…

That is correct??

T0: 1.500%

T1 upper: 2.8853%
T1 lower: 1.7500%

Self-made study notes

Hey guys, I was wondering whether anyone would be interested in self-made notes for the key topics of L2. I’ve created them while preparing for the exam myself. They helped my pass it without any problems, so I think they are worth it. Let me know if you’d be interested or want to get a sample ;)

Tracking Progress

I’m using the new Schweser online system, and they no longer offer the calendar to stay on track, rather just the percentage of material you have covered.  How are you guys staying on track to leave time for review and mocks?  

CFA L. 2 - Santa Clara, CA


If you’re interested in teaming up and doing some mock till you drop as well as discussing concepts and methods. Hit me.

- CFA L 2 


Access to ebook

Hello, I havent registered for my exam yet, (I’m waiting until Feb when I’m certain I’m ready!!!!) However I don’t have access to the new ebook, is there any way I could get access to the ebook without registering yet?

Thank you!