CF--England--CFAI-Online Practice Tests--Q1..????

CFA Level II Corporate Finance
#1

CFAI Online Practice TestS:

Corporate Finance-England:

Q1:The 2015 after-tax operating cash flow for the new division is:

I guess it should be 0.95, however the correct answer is 0.81

What do you think… ???

#2

CFAI Online Practice TestS:

Corporate Finance-England:

Q1:The 2015 after-tax operating cash flow for the new division is:

I guess it should be 0.95, however the correct answer is 0.81

What do you think… ???

#3

Yes the answer should be 0.81.

I have Calculated as per below-

EBIT(1-TAX)+D = 0.88*.68+0.21 =0.81

#4

in this problem they have an additional Net Working Capital Investment each year, but the solution shows that is not to be included in the After Tax Operating CF for the year. How should I think about the incremental NWCInv that may be required each year? Why is it not included in the ATOCF?

#5

Well…While Calculating ATOCF you will not required to consider NWCInv. If you are going to calculate the NPV then you have to consider the Working Capital to find the Initial outlay i.e you have to calculate it as

Initial Outlay =FCINV+NWCInv

NPV = - Initial outlay + CF1/(1+ R) + CF2/(1+R)^2±--------+CFn/(1+R)^n

Hope this will help you…

#6

any idea why did they use beta of 1.8 when it says it should be 1.6 in exibit 2 ?