Kaplan 2010 exam kit Q17 (a)iv Stanzial Inc (Dec 06)

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    dongbula
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    • Topics: 5
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    I have a query in our 2010 exam kit Q17 (a)iv Stanzial Inc.

    When we are using the expected free cash flow to equity to vaule Besserlot. I though interest should be deducted from profit after tax.

    for example:

    In answer:

    2007 data:
    revenve 28100
    operating profit 2248
    less:interest paid (350)
    profit before tax 1898
    less:tax 30% (569)
    after tax 1329
    add back non cash exp 1025
    less:increase w.c (172)
    less:capital invest (1250)
    so:FCFE 932

    but I thought should be:

    2007 data:
    revenve 28100
    operating profit 2248
    less:tax 30% (674)
    after tax 1574
    add back non cash exp 1025
    less:increase w.c (172)
    less:capital invest (1250)
    less:interest paid (350)
    so:FCFE 827

    Did I miss something? Please
    Thank you for your help!


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    azra_edulinks
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    • Topics: 2
    • Replies: 6

    In the same question how is the working capital calculated???


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    dongbula
    Member
    • Topics: 5
    • Replies: 7

    Hi Azra,

    The question told us that the Ke is 14%.


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    azra_edulinks
    Member
    • Topics: 2
    • Replies: 6

    i am still unable to figure out the working capital of 172 / 214 / 268.


    avatar
    dongbula
    Member
    • Topics: 5
    • Replies: 7

    working capital= current assets -current liability
    06 wc=6206-5520=686
    07 wc=686x(1+25%)=857.5
    08 wc=686×1.25×1.25=1071.9
    09 wc=686×1.25×1.25×1.25=1340

    so incremental w.c from 07 to 06 is 857.5-686=172, ect


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    azra_edulinks
    Member
    • Topics: 2
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    thank you so much!!!

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