Hello, I was doing a mock exam and I was surprised at how they calculated the Change in Capital Expenditure to use in the FCFF calculation. FCFF= Net Income + Net Interest After Tax + Non Cash charges (Depreciation, deferred tax etc…) - Change in Working Capital - Change in Capital Expenditure (Capex) or Fixed Capital I thought and I read in the books that Change in Capex is just the change in Long Term Assets. But in the Mock exam I was doing, they took the change in Long term Assets, to which they added Depreciation Expenses. Please see the exercise below: Data- Balance Sheet and Income Statement : http://i58.tinypic.com/5n7ix4.jpg
i recall encountering that too… Not too sure why it was calculated that way. I got the question wrong. this seems to be a recurring issue with most mocks is the uncertainity about how to derive FC and NWC because the input variables always seem to be presented differently
Strange i agree. If you look into the Equity book Page 302 there is an exemple where they calculate the change in Fixed Capital. They do not take into account Depreciation. So it seems the CFAI is providing conflicting information?
