- CFA Exams
- CFA Level I Exam
- Topic 5. Equity Valuation
- Learning Module 22. Free Cash Flow Valuation
- Subject 2. Computing FCFF and FCFE from net income, EBIT, EBITDA, or CFO
CFA Practice Question
Assume a 30% tax rate and a $100 increase in EBIT, this period's FCFF will ______ (increase/decrease) by ______ and FCFE will ______ (increase/decrease) by ______.
Correct Answer: both will increase by $70
FCFE = FCFF + Net borrowing - Int ( 1- Tax rate).
FCFF = EBIT (1 - Tax rate) + Dep - FCInv - WCInv
FCFE = FCFF + Net borrowing - Int ( 1- Tax rate).
User Contributed Comments 1
| User | Comment |
|---|---|
| xiong | EBIT (1-t) = 100 * (1-30%)= 70 increase |