Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Free cash flow method.
- This topic has 13 replies, 2 voices, and was last updated 9 years ago by John Moffat.
- AuthorPosts
- May 26, 2015 at 1:23 pm #249165
Hello Mr Moffat,
I was doing some past year questions in BPP and noticed in one particular question they didn’t include below items in the computation of Free cash flow, i thought that we should include the items, kindly correct me if am wrong.
1. Sale of an non current asset
2. Investment for expansion.Thanks
May 26, 2015 at 3:54 pm #249225Usually we would, but without seeing the question I cannot explain why they were not included.
If it is a past exam question then if you give me the name and which exam, then I should be able to find it.May 26, 2015 at 4:36 pm #249255The question is in BPP, Intergrand (SFM, 12/02)
(My BPP is exam upto june 2014, Question number 72, the sequence maybe different if you have the latest edition)
I sincerely appreciate Mr Moffat for your help.
Thanks
May 26, 2015 at 5:26 pm #249294What they have done is calculated the PV of the sale and the investment separately (in workings 5 and 6) and then they have added those PV’s to the PV’s of all the other free cash flows when they have totalled everything up in the APV summary.
So they have included them 🙂
May 26, 2015 at 5:32 pm #249296So its k if we can also included them in FCF?
May 26, 2015 at 5:39 pm #249298Yes – you could have done them all together (and usually we would).
May 27, 2015 at 11:03 am #249518Thank you very much Mr Moffat
May 27, 2015 at 11:05 am #249520Sir just one more question,
How about interest received and interest element on Finance lease?, am kind of confused regarding what items to put in Free Cash Flow to equity.May 27, 2015 at 3:03 pm #249564With free cash flow to equity you bring in all cash flows (including interest received, interest paid,and finance lease).
May 27, 2015 at 6:54 pm #249661But would it apply in Free Cash Flow to Firm?
May 27, 2015 at 7:24 pm #249677I got this question from BPP Q29 Neptune (6/08)
Where they proceeded for more than 5 years. Forgive me asking too many questions,
Thanks
May 28, 2015 at 8:24 am #249745Free cash flow to firm is the same as free cash flow to equity except that it will not include interest payments.
What may be causing you a problem with Neptune is that in the BPP answer (depending on which edition of the Revision Kit you have) there is a big typing error and the tax flows are all in the wrong columns. However, the final net cash flows are correct (the typist has just put things in the wrong columns).
May 28, 2015 at 12:58 pm #249818Thank you very much Mr Moffat.
May 28, 2015 at 3:05 pm #249861You are welcome 🙂
- AuthorPosts
- You must be logged in to reply to this topic.