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Hi Sir,
In appendix part (i), when calculating Nente equity value, why the answer does not subtract the current liabilities ($1,890,000):
Equity value = $13,471,000 – $6,500,000 = $6,971,000
Thanks!
Free cash flow gives the value of the business i.e. equity + long-term debt.
(or, if you prefer, total assets less current liabilities).To get the value of the equity we only subtract the long-term debt (the non-current liabilities)
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