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Can somebody please help me with discount factor rate used in year 2018. Rate is 7.067, where is it coming from?
link to article:
314*(1.03)/12%-3% and discount it at 12% rate factor for 5 years I.e 0.567 and then you add the 2018 value of 314 after discounting it at the same rate I.e 0.567, you get this figure.
It is a very weird way indeed. I don’t know if I’ll be able to do it in the exam.
I figured out 1/0.12-0.03 x 0.636 (4 year rate) = 7.067. Actually formula was given in note 9. Perpetuity starts in year 5, so we discount it for a 4 years.
314/0.09 x 0.636 =2219
Can anyone explain why there are no working capital adjustments? Normally for FCFF we adjust EBIT (1-T) for working capital items, non cash expences and CAPEX, but there are no WC adjustments in the article… Easy to get confused due to inconsistent approach…
Sales and operating profit itself is accounted based on accrual basis so it is not a cash flow, so we need to adjust it using WC adjustments in order to make it a cash flow is not it?
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