This question is in regards to the FCFF formula. FCFF = NI +Noncash charges + After Tax int exp - FC Inv - WCinv When Calculating FC Inv do you add depreciation expense to it? So for instance say you have a 50K increase in Fixed Assets on the b/s and 20K dep exp on the i/s. So assuming dep in your only noncash charge we would have FCFF = NI + 20 + AT int exp - 70 - WCinv Stalla has this in the solution for question 5 on page 12-76 but I didnt think you add the dep expense in calculating FC INV.
Depreciation is accounted for in noncash charges. Why would you also add it to FCInv? If it’s in the solutions, could there possibly be some sales of assets? FCInv = Cap Ex - Sale of Long Term Assets.
That’s what threw me off. The answer says that the depreciation charge reduces fixed capital so it must be added back in. I guess is what you have to watch out for is where on the balance sheet you pull your figure for FC Inv. If the figure is gross then you are okay but if it is net of depreciation then you have to add depreciation back in.
FCInv = Capital Expenditure - proceeds from sales of LT Assets no depreciation there