Growth in FCFF components

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Usif

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if the questions says that all the components used to calculate FCFF have increased in the same rate, is FCFF1 simply = FCFF0*(1+g)?
 
FCFF0=FCFF1 right?
FCFF=NI+NCC+[interest(1-TR)]-FCInv-WCInv
Wouldn’t the increase in FCInv and WCInv just wipe out the increases in NI, etc?
Not sure. Good question.
 
FCFF would also increase by the same % rate. Take for example:
Year 0— NI=200, DEP=20, Int(1-t)= 30, WCINV=30, FCINV=40 FCFF= 180 THEN
Everything increases 10%
Year 1— NI=220, DEP=22, Int(1-t)= 33, WCINV=33, FCINV=44 FCFF= 198
198/180=1.10 === 10% in FCFF
Sorry I suck at formatting
So the answer to your original question is YES
 
nice illustration ^
I’ve gotten questions like this on qbank so I’m inclined to believe that if they told you everything grow at the same rate then your simple formula would be an ok forecast of FCFF1:
A common approach to forecasting free cash flows is to:
A) project net income and expected capital expenditures.
B) project earnings before interest and taxes (EBIT) and expected capital expenditures.
C) project operating income and deduct depreciation.
D) calculate historical free cash flow and apply an expected growth rate.
Your answer: D was correct!
Historical free cash flows are often used for forecasting.
 
Isn’t A just the formula:
ni - (1-DR)(FCinv-Dep) - (1-DR)(WCinv)
which is used for forecasting?
 
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