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Basic Question 2 of 2
Watson wants to forecast FCFE of Alcan, Inc for the year of 2011. After careful research and evaluation, he expects (per share value):
- EPS to grow 10% from $4 in 2010.
- Capital expenditure to grow 12% from $6 in 2010.
- Depreciation to grow to 50% from $3 in 2010.
- Working capital to grow 25% from $1 in 2010.
- Target debt ratio: 40%.
What is the expected FCFE for 2011?
User Contributed Comments 7
| User | Comment |
|---|---|
| danlan2 | NI+(1-DR)(DEP-FCInv-WCInv) |
| MonkeySee | It is assumed that part of the change in working capital is funded by debt thus to maintain the capital structure. |
| rhardin | We should subtract out working capital INVESTMENT and fixed capital INVESTMENT, not just the totals of what FC and WC will be in 2011. |
| business | why depreciation is 0.6*1.5*3 added instead of just 1.5*3. Surely the debt holders are not funding part of depreciation. |
| quanttrader | I for forecasted FCFE use only growth in FC & WC inv |
| davidt876 | i'm a lil confused too business |
| ashish100 | It's simple. Just thank danlan keep on keepin on. |
You have a wonderful website and definitely should take some credit for your members' outstanding grades.
Colin Sampaleanu
Learning Outcome Statements
describe approaches for forecasting FCFF and FCFE;
CFA® 2025 Level II Curriculum, Volume 4, Module 22.