getting a little mixed up when to use this formula to solve for FCFE, as opposed to FCFE = NI + NCC + Net Borrow - FCInv - WCInv. although i think in most instances each method produced the same value. when debt ratio is given is the 1st method, NI - [(1-DR) x (FCInv - Depr)]…more appropriate to solve for FCFE? thanks, John
they will both give you the same answer - you just need to have the info available to solve it. Net borrowing = DR(FCInv - Dep + WCInv) so it’s essentially the same formula. I believe the derivation is in the CFAI book.
usually we will use the normal (your first) formula. But if they give you a scenario with the data like debt ratio, %FCInv, %WCInv, then that should send off some fire alarms in your head to use the 2nd equation