I’m looking at the answer and it takes CFO - FCInv+net borrowing to get FCFE. Why aren’t we subtracting interest from this? I included 250,000 x the interest rate x (1-t).
In other words if we’re adding net borrowing, shouldn’t we include a charge for interest?
When starting with CFO, interest is already accounted for. You include net borrowing because the assumption is that funds from borrowing is available to the equity holders.
I figured that was the answer but how do we know this isn’t IFRS where the company can choose to have interest included with cash from financing?