FCFE - net borrowing???

question 8 on the version #2 sample test… asking about the $ difference between FCFF and FCFE. we know that to find the difference you subtract interest*(1-tax rate) and add in net borrowing. in the balance sheet shown, the long term debt decreased from $2449 to $2229 but there was no mention of paying it down…and yet in the answer CFAI counted that as a decrease in net borrowing. if the market value of long term debt changes, that doest accrue to FCFE though does it???

MV of debt doesn’t show on your BS. It is BV of debt.

thanks.

I can’t get at how they calculated the change in working capital. Please help!

sofiger wc= a/r+inv+other current assets - current liabilities… do it in year 07 and year 06…

This one is driving me crazy How does one calculate net borrowing? I keep on effing this up. Do you look on the balance sheet or cash flows? I can do FCFF in my sleep.

net borrowing is Any New Loan Taken - Any Loan payments made… (What comes in - What goes out) you can get this from your balance sheet as well as CF if only balance sheet is given - if loan has increased from year 1 to year 2, you have a positive net borrowing… if the cash flow statement is given - look for line items that say - additiona loan proceeds, repayment of current portion of loan…etc…

thanks a lot

barthezz Wrote: ------------------------------------------------------- > sofiger > > wc= a/r+inv+other current assets - current > liabilities… do it in year 07 and year 06… I keep getting -14 instead of -25 for NWCInv …??*&*&(%