While using FCFF, once we discount the FCFF we adjust for Cash and Debt (Add cash and subtract Debt). Do we need to do the same for FCFE? I just appeared for Level I this june, so I dont know whether the answer to my question is in the Level II curriculum.
kh.asif Wrote: ------------------------------------------------------- > While using FCFF, once we discount the FCFF we > adjust for Cash and Debt (Add cash and subtract > Debt). Do we need to do the same for FCFE? > > I just appeared for Level I this june, so I dont > know whether the answer to my question is in the > Level II curriculum. Hey you must be kidding. See the posts nowadys, L2 forum is out of apetite of entertaining “curriculum” questions. You have to wait until Nov 09. Any way best of luck.
You deduct debt to come to the value for equity folders. So no to FCFE
cfaboston28 Wrote: ------------------------------------------------------- > You deduct debt to come to the value for equity > folders. So no to FCFE Thanks for your answer. Makes sense that no ‘debt’ adjustment is needed. However, do we need to add “cash and cash equivalents”?
If you did not add cash and cash eq wouldn’t you have zero for free CASH FLOW to equity?
I think you leave cash and cash eqv in calculating FCFE and FCFF. Also you use your cash in paying dividends which is after you determine the value of FCFE.
the answer was C