I am a bit confused as to when to use the forecasting FCFE formula or the other 3.
1) FCFE = FCFF - Int * (1-T) + Net borrowing
2) FCFE = NI + NCC - FC Inv - WC Inv + Net borrowing
3) FCFE = CFO - FC Inv + Net borrowing
OR
4) FCFE = NI - (1-DR) * (FC Inv - Dep) - (1-DR) * (WC Inv)
For instance, in CFAI EOC Reading #34, problem 6, we’re given enough information to solve the problem using either equation 2 or equation 4 of the above. I used equation 2, but got the answer wrong as they used equation 4 (forecasting FCFE) instead.
Can anyone tell me if they should actually give the same answer? If not, how do we know when to use one vs the other?
For instance, for year 2009, i got FCFE of .385 using equation 2, but the correct amount is .352 because they used equation 4 instead.
1) FCFE = FCFF - Int * (1-T) + Net borrowing
2) FCFE = NI + NCC - FC Inv - WC Inv + Net borrowing
3) FCFE = CFO - FC Inv + Net borrowing
OR
4) FCFE = NI - (1-DR) * (FC Inv - Dep) - (1-DR) * (WC Inv)
For instance, in CFAI EOC Reading #34, problem 6, we’re given enough information to solve the problem using either equation 2 or equation 4 of the above. I used equation 2, but got the answer wrong as they used equation 4 (forecasting FCFE) instead.
Can anyone tell me if they should actually give the same answer? If not, how do we know when to use one vs the other?
For instance, for year 2009, i got FCFE of .385 using equation 2, but the correct amount is .352 because they used equation 4 instead.