Fargo Case from the CFAI am mock (Equity Valuation).
Why in the calculation of FCFE2013 (question 40) CFO2013 waqs adjusted by CapEx and additional borrowing before FCFE2014 and FCFE2015 were projected using given growth rates?
The case explicitly says that the company needs expanson CapEx of $400K in 2013, not on the on-going basis. And the additional borrowing of $250K in 2013 should be added to FCFF only in 2013, but not on the on-going basis. Also, the solution does not show any adjustments for the additional 8% interest on the new debt and debt amortization schedule is not given as well to properly incorporate debt and interest payments.
Any thoughts about this?