What is the company’s FCFF? Net income = 1,204 Depreciation/Amort = 293 Decrease working capital = 36 Interest Expense = 290 Additions to PP&E = 1,317 Disposition of PP&E (from cash flow statement) = 65 Tax Rate = 35% This question drove me crazy. The answer is 404.5 = 1,204 + 293 + 36 + (290*.65) - 1317 Why do you not add back the 65. Shouldn’t the FCInv be net of asset sales?
if this was a 2009 mock question - there was an erratum on it – they had forgotten to include it. However this was the only answer choice provided. 1204 + 293 + 36 -1317 + 290 (1-0.35) + 65 = 469.5
Ok it was the 2009. Is the 2009 errata still accessible?
I had received this in an email from last year Question 19: You are right that the proceeds from the sale of assets should be considered in determining the free cash flow. The question is being updated to reflect this fact.
CP shdn’t we add the net amount ((65 sale price less BV (0)) * 1-.35) i.e 446.75 instead of 469.5
no… you add the entire investment (or sale value). No adjustment for taxes.
If the question included BV’s etc it seems like you would be right. If not specified, I wouldn’t make that assumption and I would go with CPs answer. How do you have the 2009 Mock? (or…how do i get it???)
or you could just add the total CFI in this example. it is from the 2009 Mock
anyone have the 2009 errata?