[help]A question about the WCinv in calculating the free cash flow to the firm

CFA Level I FRA
#1

Joplin Corporation reports the following in its year‐end financial statements:

Net income of $43.7 million. Depreciation expense of $4.2 million. Increase in accounts receivable of $1.5 million. Decrease in accounts payable of $2.3 million. Increase in capital stock of $50 million. Sold equipment with a book value of $7 million for $15 million after‐tax. Purchased equipment for $35 million.

Joplin’s free cash flow to the firm (FCFF) is closest to: A. $16 million. B. $24 million. C. $66 million.

The answer :

CFO : 43.7+4.2-8-1.5-2.3=36.1

FCinv=35-15=20

FCFF=36.1-20=16.1

My question is that why the investment in capital stock for 50 was not included as a component of WCiv (CA-CL) when calculating the FCFF ?

#2

I suspect that by “increase in capital stock of $50 million” they mean that the company issued $50 million of common (less likely, preferred) stock.

#3

So you mean issuing stocks doesn’t belong to the scope of working capital investment ???

sorry for my bad english .

#4

That’s correct.

And your english is quite good.

A million times as good as my Mandarin.