I am looking at page 361, Equity Reading 42. We are asked to compute FCFF, which I understand to be [Ni + NCC + Int (1-tax rate) - FCI - WCI.] WCI, in this example is farly straightforward: [(A/R + Inv) - A/P]. It is also labeled in the cash flow statement as: Increase in Working Capital. FCI, on the other hand, totally confuses me. This is what the fact pattern gives us: “The fixed capital consists of non depreciable property of $50,000 and depreciable property of 450,000.” Question: Why is the FCI 0 (zero) in 2008? Question: Why is the FCi 50,000 in 2009? Is there a formula for FCI that I am missing? Thanks in advance for any responses.
I am pretty sure I just found the answer. It is found in Exhibit 5, two pages away from the question! On page 363 it is clearly written: Purchases of PPE. If anybody has any tips on computing, finding FCI and WCI, and how you think CFAI wants us to approach the two, I would be grateful. Thanks