# How did they get NWC and FCI?

in course 8, business valuation modeling, section “valuation multiple”, slide 6/13, to find the FCFF.

The formula given by the FMVA is

FCFF = EBIT (1 - t) + D&A - Change in WC - Capex

they got 300 for NWCI (working capital) and 150 for FCI (capex).

The only explanation given by the lecturer is (from the video transcript).

“working capital are 300 as a net reduction of cash and the capital expenditures were 150 as a reduction of cash.”

Given the B/S and the income statement, I have no idea how to get the 300 and 150 from the financial statements.

I have attached picture of the slide and the financial statement.

Thanks for the question and happy to help out.

For the simplicity of calculation, the change in working capital and capital expenditure are provided as is in the example to demonstrate the concepts. Normally, one would need to compare this year’s and last year’s financials in order to determine the change in WC. On the other hand, capex can usually be found on a cash flow statement in the investing cash flow section.

For more detailed explanation on where to find and calculate these two numbers, please refer to the video lecture “Calculating free cash flow to the firm” in the section "Discounted Cash Flow (DCF) Model.

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