FCFF to FCFE

CFA Level II
#1

If we want to directly go from FCFF to FCFE

Would this just be CFO - INT (1-T) + CHANGE DEBT - FC INV ?

And vice versa for other way around?

#2

FCFF to FCFE is always as simple as this …

Deduct After Tax Interest Expense and add in Net Borrowing.

FCFF - Int (1-t) + Net Borrowing = FCFE

#3

Thanks. Oh yeah no need to include FC inv as its already part of the FCFF equation.

Also to confirm WCI is just current assets excluding cash - current liabilities?

#4

The change in WC is (Non-Cash Current Assets) - (Non-Debt Current Liabilities). This is the way I like to remember it to avoid making a mistake.