Hi everyone,
I found something confused when doing some exercises related to FCFF.
We have the formula of FCFF calculated from Net Income as:
FCFF = Net Income + Noncash Charge + [Int * (1-tax rate)] - FCInv - WCInv
Where:
Int = cash interest paid
FCInv = net capital expenditures (equal cash spent on fixed asset - cash received from selling fixed assets)
WCInv = working capital investment
As I understand, gain/loss from sale of fixed assets is included in cash sources when calculating FCInv AND this gain/loss is also included when calculating Net Income. Thus, when we adjust FCInv from Net Income, do we duplicately include the gain/loss from sale of fixed assets?
Thanks for your help!!!