[help]A question about the WCinv in calculating the free cash flow to the firm

[booker]

Joplin Corporation reports the following in its year‐end financial statements:
Net income of $43.7 million.
Depreciation expense of $4.2 million.
Increase in accounts receivable of $1.5 million.
Decrease in accounts payable of $2.3 million.
Increase in capital stock of $50 million.
Sold equipment with a book value of $7 million for $15 million after‐tax.
Purchased equipment for $35 million.
Joplin’s free cash flow to the firm (FCFF) is closest to:
A. $16 million.
B. $24 million.
C. $66 million.
The answer :
CFO : 43.7+4.2-8-1.5-2.3=36.1
FCinv=35-15=20
FCFF=36.1-20=16.1
My question is that why the investment in capital stock for 50 was not included as a component of WCiv (CA-CL) when calculating the FCFF ?

 

[S2000magician]

I suspect that by “increase in capital stock of $50 million” they mean that the company issued $50 million of common (less likely, preferred) stock.

 

[booker]

S2000magician wrote:
I suspect that by “increase in capital stock of $50 million” they mean that the company issued $50 million of common (less likely, preferred) stock.

So you mean issuing stocks doesn’t belong to the scope of working capital investment ???
sorry for my bad english .

 

[S2000magician]

That’s correct.
And your english is quite good.
A million times as good as my Mandarin.