Schweser Module quiz 28.2

CFA Level II Equities
#1

I am struggling a bit with Module Quiz 28.2, question 2:

  1. Why we do not deduct tax from the equipment sale of $10-$2=$8? Is it just omitted for simplicity purposes?

  2. In FCFE calculation if NCC (Depreciation - Gain) is first added to NI and then deducted as a part of FCInv (Depreciation - Gain) what’s the point? Is it because NCC can be much more than just related to PPE?

  3. If you look strictly at cash inflows and cash outflows, it is evident that cash spent on PPE was $46 during the year and asset sale was $10, resulting in a net $36 cash outflow. Why FCInv is $55 then? That is not real cash.

Thank you for your thoughts.

#2

It seems that is respect of question 3 it is $17 depreciation that left the company counts as cash out, reduced by $8 cash in from the sale. $2 difference between $10 sale price and $8 is the book value of remaining equipment, that also left the company as sort of “cash out”.