CFA Practice Question

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CFA Practice Question

Connie's Sporting Goods (CSG) has net income of $805 million for 2016. Using information from the CSG's financial statements below, use the CFO approach to find what FCFF and FCFE should be for CSG. Assume the income tax rate is 30%.

Correct Answer: $1,198 million and $2,068 million

FCFF = CFO + Int (1 - Tax rate) - FCInv
= 2151 + 942 (1 - 0.3) - 1612 = $1,198 million

FCFE = CFO + Net borrowing - FCInv
= 2151 + (4062 - 2533) - 1612 = $2,068 million

User Contributed Comments 6

User Comment
StanleyMo Analyst notes dun repeat questions!
aparish No, it's not a repeat. The first question asks us to calculate FCFF and FCFE from NI. This question asks us to calculate them from CFO.
Allen88 I guess CFO= NI + NCC - WCInv
rocyang agreed, it's the process that counts!
Paulvw Analystnotes is giving us sufficient data for both CFO and NI approaches to make us think about *both*. In the exam we will have sufficient info for one approach, and enough on the other to confuse us if we are unfamiliar. Good question.
davcer Net income approach NI+NCC+int(1-tx)-WCinv-FCinv
CFO approach CFO+int(1-tx)-FCinv
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