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.
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??
T1 upper: 2.8853%
T1 lower: 1.7500%
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 ;)
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
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?