Earnings Measure

Question 1

Non-Cash Working Capital

Answer 1

Non-Cash Current Assets-Non-Debt Current Liabilities

Question 2

FCFE

Answer 2

Net Income

• (Capital Expenditures - Depreciation)
• Changes in non-cash Working Capital
• (Principal Repayments-New Debt Issues)

Question 3

FCFE when Leverage is Stable

Answer 3

Net Income - (1- D/C)(Capital Expenditures - Depreciation)
- (1- D/C) Working Capital Needs

D/C = Debt/Capital Ratio

Question 4

FCFE (From FCFF)

Answer 4

FCFF – Interest expense (1-t) + Change in Debt

Question 5

FCFF

Answer 5

EBIT(1-T)-(Capex-Depreciation)-Changes in non-cash working capital

Question 6

Adjusted Operating Earnings

Answer 6

Operating Earnings + Operating Lease Expenses - Depreciation on Leased Asset

Question 7

Return on Invested Capital

Answer 7

EBIT(1-T)/(BV of Equity+BV of Debt-Cash)

Question 8

Expected Growth Rate(for existing investment and new investment)

Answer 8

ROC t+1 * Reinvestment rate
+(ROC t+1 – ROCt) / ROCt