CFAI mock afternoon Q's 32 and 34... Subtracting Debt to value equity

CFA Level II Equities
#1

Hello Everyone, my first ever post!

I’m confused about which debt to subtract from EV to determine equity value. In Q32, they subtract A/P, notes payable, and LTD. In Q34 only LTD. I thought A/P was a part of working capital and shouldn’t be backed out… Why not also subtract notes payable from EV in Q34??

I’ve posted the Q’s below for reference.

Thanks!!!

(questions removed)

#2

Look at the name. Free cash flow to the firm. So that’s the total firm value. It’s not like you buy the debt as well. You only buy the equity, so you subtract the debt to get the equity only value

#3

Thank you! But by that logic, why not also subtract notes and A/P from EV in Q 34?

#4

For 33, if you do not subtract A/P then the result is 1219 which is not an option. In the readings, some definitions of total debt include all liabilities. it is bizarre and their use seems arbitrary to me.

For 34, this was tricky but same reason. If you back out the notes payable, the result is not an option. This just wastes a lot of time IMO and an annoyance if actual exam is like this

#5

Yep, seems like there is quite a bit of arbitrary stuff out there, my favourite is Q2 of the morning session. I guess you have to know whether something is not comprehensive because it’s not prominently displayed, or not prominently displayed becaues it’s not comprehensive…