# estimating FCInv

Can someone confirm if this is right? Est. FCInv = (Capex - Depreciation)/(Increase Sales) If it is right, then when we calculate estimate FCFE, wouldn’t depreciation get deducted twice??? given: fcfe = NI - [(1-dr)(Fcinv-Dep)] - [(1-dr)(Wcinv)]

why are you dividing by Increase in sales?? also FCInv is just your additional purchase of fixed assets…

I think you are looking at two different time periods here. Your FCInv may be based on historical results such as the mentioned (CAPEX-Dep)/Increase sales. So in the future, your FCInv will equal that percentage multiplied by your increase in sales. This can be multiplied by your (1-dr) so that it will include borrowing. This is much easier if I show an example: Historically, [(capex-dep)/increase in sales] has equaled 20%. This means that for an increase in sales of \$100, \$20 of this will be reduced by your FCInv. Looking forward, when forecasting your FCFE, you can use: FCFE = NI - [.2(increase in sales)(1-dr)] - [WCinv (1-dr)]

^^ What he said.

^^ can I do that on the exam…“what the guy who answered it correct” chose…