CFA Practice Question

There are 201 practice questions for this study session.

CFA Practice Question

Watson is planning to value Alcan, Inc for the year of 2011. The financial information Watson has assembled for his valuation is as follows (in millions):

  • EBITDA: 100.
  • Interest expense: 20.
  • Depreciation: 30.
  • Income tax rate: 35%.
  • Investment in working capital: 15.
  • Investment in fixed capital: 25.
  • Net borrowing: 15.

What is the FCFF for the company?
A. $44.5 million.
B. $14.5 million.
C. $35.5 million.
Explanation: FCFF = EBITDA (1 - Tax rate) + NCC (Tax rate) - FCInv - WCInv = 100 x (1 - 0.35) + 30 x 0.35 - 25 - 15 = $35.5 millions.

User Contributed Comments 3

User Comment
danlan2 Plus NCC*Tax rate, not minus NCC*Tax rate
shiva5555 What is NCC?
janis36 Non-Cash Charges
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