March Mock (AM): Equity Doubt (Pls clarify)

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cfa2014

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So i have the following doubts on the Equity Problems from the March Mock (i understand the solutions but would appreciate if you could explain me why the following methods are not right):
Cuyahoga River Navigators, Inc. (CRN) (Question #3 of 6):
FCFE = Net income - WC - (CapEx- D&A) + Net Borrowing
= 120 - (-1.8) - 165.3 + (5+7.5) = -31.0 (THIS IS NOT THE SOLUTION)..what is wrong in doing this way?
Peter Tanner (Question #4 of 6):
Why can’t i go with
Sustainable growth rate (i.e. long term dividend growth rate) = b (Industry avg) * RoE (Industry avg)
= (1-0.65) * 12.8% = 4.48% (not the right answer)..?
 
My reason was driven by the fact that it is ‘Net investment in fixed capital’ (Net meaning net of Depreciation).
If i add back 82.5, my FCFE comes out at 51.5..? (vs. solution of 46.24)
 
edit…. I get 46.23 working from EBITDA… I’m not sure where you’re going wrong, bud. Sorry. I find it easiest to calculate FCFF first, then FCFE…
 
Find out if the tax rates are the same in both cases. The tax rate changes to 35% from about 32%…Please check
 
Great thanks Phantom9
I did check, the assumptions on which the Problem is based uses 35% tax rate (vs in Exihibit where its ~32%.

It tells me how easy it is to trip on the exam questions.

I think i also now understand why i got the second problem above wrong, but would you also be able to comment on my next question as well?

Thx!
 
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