When calculating fixed capital investment, don’t you need to account for sales of assets in the answers it shows less fixed assets of $1317 however in the statement of cash flows it showed a positive number for a disposition of property and equipment…shouldn’t that be included in the calculation?
I noticed that in the exam process. I thought cuz disposition is not a recurring stuff, so in the FCFF/NOPLAT thing, we ignore it.
I could swear you’re suppose to add disposition/sale of fixed assets as part the change in fixed assets no?? This is the same reason why i couldn’t get the answer right…
I read through this in schweser today and they definitely said to add back any sale of LT assets to FCInv.
God…what the hell?!? As if FSA isn’t confusing enough…i don’t need CFAI to confuse me more. So do we all agree this answer is wrong?
I think if they give you GROSS PP&E, you can just use the balance sheet account. If they give you net PP&E, you have to back out any sales.
page 355 of the CFAI text (which the answer refers to) says, “if a company receives cash in disposing of any of its fixed capital, the analyst must deduct this cash in arriving @ investments in fixed capital.” so, from the horse’s mouth, that answer was wrong. the only reason i got it right i think is that I didn’t count it b/c the answer choices didn’t include it as a possibility.
that is exactly how I got the question right ng30…I will take it on exam day
ng30 Wrote: ------------------------------------------------------- > page 355 of the CFAI text (which the answer refers > to) says, “if a company receives cash in disposing > of any of its fixed capital, the analyst must > deduct this cash in arriving @ investments in > fixed capital.” so, from the horse’s mouth, that > answer was wrong. the only reason i got it right > i think is that I didn’t count it b/c the answer > choices didn’t include it as a possibility. just checked, quite clear in textbook
I sent an e-mail to CFA society mentioning that, no reply yet…been more than a week.
The Mock 2 exam is Bullsh!t. I can’t believe they are charging 60 bucks for an exam with incorrect problems and numerous inconsistencies. I spent like 15 minutes on that damn problem, and another 15 on that 40% debt problem that was supposed to be 50% debt… What CRAP.
I agree we should include the amount from disposal of asset. It is quite obvious.
If I remember the problem correctly, the gain/loss from disposal should accounted for in NI. So all you need to do is subtract the new investment in fixed assets.
^^^^ but this is cash
ozzy, you would back out the gain (non-cash) and add the cash flow on the SF statement. So the question is…what if they have both answers on the test? Most of us got it right only because they didn’t have the other (correct) answer as an option.
I got this wrong because I just did not think about adding back the sale from disposition… The example on page 355 says: suppose we had a sale of equipment for 100k, this cf reduces the co’s cash flow outflows for inv in fixed capital, that means to add this 100k back to me…
I was going to ask the same question…I thought it should be included in the FCinv which essentially is CFI - correct?
i somehow didnt see the problem with 40% debt… heres an excerpt from my screen dump (hush) If the proposed distribution center were financed 50% by debt, the accounting income (in BRL thousands) for the first year would be closest to: Select exactly 1 answer(s) from the following: A. 10,125. B. 10,635. C. 10,680. D. 11,125. Mark question for later review i took the test yesterday, you reckon they corrected it in the meantime?.or did you misread it McLeod?
Nope i remember the 40% debt thing too. Struggled like crazy over it.
for sure they corrected it… dinesh - the mole - must’ve told them …