FCFF

CFA Level II
#1

2007 Revenues 6,456 COGS 3,363 SGA 1,744 EBITDA 1,349 Dep expense 243 Op income 1,106 Int expense 186 Pretax income 920 Income tax 294 Net income 626 Number of outstanding shares (millions) 411 2007 Earnings per share 1.52 2007 Dividends paid (millions) 148 2007 Dividends per share 0.36 2007 Fixed capital expenditures (millions) $ 535 Exhibit 2 Consolidated Balance Sheets (millions) At 31 December 2007 2006 Cash and cash equivalents 32 21 Accounts receivable 413 417 Inventories 709 638 Other current assets 136 123 Total current assets 1,290 1,199 Long-term assets, net 4,814 4,522 Total assets $6,104 $5,721 Current liabilities $2,783 $2,678 Long-term debt 2,249 2,449 Common stockholders’ equity 1,072 594 Total liabilities and equity $6,104 5,721 Exhibit 3 Other Current Financial Information for McLaughlin Corp. Effective tax rate 32.0% Cost of equity 12.0% Weighted average cost of capital 9.0% Non-operating assets 0 Question FCFF for 2007 was closest to: Select exactly 1 answer(s) from the following: A. $460 million. B. $474 million. C. $485 million. D. $545 million.

#2

626 + 243 + 186*0.68 - 25 - 535 = 485 = C?

#3

yes C its a violation to post this question it is stright out of the sample exam

#4

So, how did u get the net working capital?

#5

u take into account only the non cash change in working capital 80-150 = -25 Hey while we are at this in the sample 2 for FCFE calculation in Q 8 why dont they subtract Interest expense from FCFF weird >???

#6

For the sake of clarity. I seem not to see the non cash change in working capital

#7

nor me :frowning:

#8

Can we get some clarity in the house, pleeaasse…

#9

Ok, it’s 4 AM here and I have lost all my coherence… still I will give it a try total change in CA = change in AR + change in Inv + change in other assets total change in CA = -4 + 71 + 13 = 80 total change in CL = change in AR + change in Inv + change in other assets total change in CL = 105 change in NWC = 80 - 105 = -25

#10

dinesh go to bed this is getting ridiculos

#11

I’m not that stupid in wondering why change in WC = Change in CA - Change in CL am I? Lots of other things change current assets and current liabilities don’t they? The current portion of long term debt for example? Humpf.

#12

Thanks guys… I can see clearly now…

#13

Still a bit hazy for me as I think it’s flawed… but guess if it comes up on the day I’ll now get the mark!