Do chapter 34 or No of Equity ? Industry and Company analysis

i havent seen any questions on this soo far or maybe I just got them right cause the chapter is obvious.

I dont know though. I still have time but I dont really want to read it. Only chapter I skipped along with the last chapter of Econ (Regulations) —Probably will go over this.

Is it possible for an entire passage to be on chapter 34? Should I read it?


Comparatively it is easy topic you can read it from the schweser…

I wouldn’t bother to study Reading 34 at all.

(Unless, of course, it shows up on the exam next Saturday; then I’d make sure I know it in detail.)



Magician’s got style

34 is FCFF & FCFE, it’s guaranteed. infact 2 vignettes on 34 are quite likely.

Haha… I look over it then. I’m just tired…I just dont get it…I haven’t seen a question on it anywhere and it’s like a 100 pages in the text…is it just a chapter i can run through and I’ll get it…

Onlysimon — Not the FCFE chapter — the one on Industry analyssi

FCFF is chapter 36 stuff…

my reading 34 notes… levered company with negative FCFE V = FCFF(discounted) + Operating Assets(PV) + Cash + Marketable Securites(beyond operating needs) + Non operating assets - Debt (Market Value) If WACC ratios are not known use target ratios. Use FCF models when - dividends different from ability to pay - control perspective IFRS vs GAAP IFRS - dividends paid (CFO or CFF) IFRS - dividends received (CFI or CFO) IFRS - interest received (CFI or CFO) IFRS - interest paid (CFO or CFF) GAAP - dividends paid (CFF) GAAP - dividends received (CFO) GAAP - interest received (CFO) GAAP - interest paid (CFO) NCC for FCFF calcs (+) - depn - amortisation - imparemenet of intangibles - restructuring - losses - amortisation of long term bond discounts - deferred tax charges (if expected to reverse, do not add back) NCC for FCFF calcs (-) - reversals from restructuring - amortisation of long term bond premiums - gains FCFE = NI - (1-DR)(FCInv-Depn) - (1-DR)WCinv DR = target debt/asset ratio Net Borrowing/Debt = FCinv - Depn + WCInv FCFF = CFO + Int(1-tax) - FCInv (true only for US GAAP??) NI = ( EBIT -Int) (1 - tax) NI = ( EBITDA - Depn - Int) (1 - tax) FCFE = FCFF - Int(1-tax) + NewDebt FCFF = NI + NCC + Int (1 -tax) - FCInv - WCInv Price ‘non-operating’ assets at market value (adjust from BV). Problems with EBITDA - ignores Depn tax shield - FCInv ignored - WCInv ignored Share Repurchases/Dividends have minor effect on FCFE, no effect on FCFF. Decrease in leverage decreases FCFE current year, increase in future. NI and EBITDA poor proxies. FCFE = NI + NCC - FCInv - WCInv + NewBorrowing (dont remember this, derive from FCFF) FCFF = EBITDA(1-tax) + Depn*tax - FCInv - WCInv