Hello, I do not get the FCFE calculation in Q51, especially the WC and the net borrowing part. CFAI includes Cash in WCInv calculation and subtracts increase of notes paybles from net borrowings. That’s not how I would calculate FCFE. Any opinions on that? Regards, sehens
Resolved - is an errata…
I think that the way they explain it is a bit weird. However, there are THREE mistakes in it. 1. Change in net working capitals don’t include cash. 2. Notes payable is considered as debt in FCFE calculation and it is not part of working capital (take it out otherwise you are counting it twice when you do the net borrowings). 3. The sign they used is wrong. Increase in payable is positive not negative. How I’d do this NI = 120 Depreciation = + 82.5 Change in WC = +1.8 CAPEX = - 165.3 Net borrowing = 12.5 FCFE = 51.5
What do you mean “resolved, in errata?” I get exactly what kaboobies got.
The tax rate implicit in the exhibit is around 32% whereas we are supposed to use a rate of 35%. Hence we start with EBITDA and calculate with the new tax rate.
NM, I didn’t even know there was “errata”, where mistakes were corrected. Would like to get this particular 25 minutes of my life back however.