ABC Co. Consider the following data and do the following:

1. Calculate FCF and FCFE using the EBITDA method.
2. Calculate FCF and FCFE using the CFO method.

FCFs and FCFEs from the two methods must be the same.

Table 2.2. ABC Co. data for

Amount	Definition
400 dollars	CHIEFS
100 dollars	interest payment
120 dollars	Income tax [40% of (400 - 100)]]
180 dollars	Net income
$200 dollars	Depreciation
$ 300	Capital increase
8 dollars	Increase in required non-cash working capital
2 dollars	Required cash increase
150 dollars	Increase in debt financing
%40	Marginal and average tax rate

Answer rating: 100% (QA)

To calculate Free Cash Flow FCF and Free Cash Flow to Equity FCFE using both the EBITDA method and the CFO Cash Flow from Operations method we need to ... View the full answer