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Hi ! I just started revising and I’m stuck at question 41 Fly 4000 of revision kit BBP. I checked how to calculate FCFE already but didn’t come to $87.2m as in the answer.
As FCFEt = Net profit after tax + Depreciation + Foreign Dividends – Total Net Investment + Net debt Issuance + Net Share Issuance
I assume for the question
FCFE = 50m Profit after tax + … but other info is not available. Could anyone pls. help to explain the trick here?Thanks a bunch!
The ‘trick’ is that surely since we need the cash flow, the figure from the statement of cash flows for ‘net cash inflow from operating activities’ is the starting point. The figure will already have adjusted the profit for depreciation etc..
So for FCFE we only need to adjust this figure by the interest, the tax, and the reinvestment necessary.
Hi,
Please advise in case of FCFE should interest be adjusted before tax or vise versa
Thanks
In this particular question, the order is not important because you are given both figures.
In this particular question, the order is not important because you are given both figures.
Hi Sir, it’s me again. Sorry for troubling. I want to ask why the repayment of secured loans is not deducted when we calculate FCFE. The question stated that expected growth based on current rate of retention. Currently the company is repaying debt of 31. The FCFE formula state that we should deduct any repayment of debts so why they didn’t minus for this question?
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