FAC1602 ASSIGNMENT 5 STUDY GUIDE 2026 QUESTIONS WITH FULL SOLUTIONS GRADED A+

FAC1602 ASSIGNMENT 5 STUDY GUIDE 2026
QUESTIONS WITH FULL SOLUTIONS GRADED
A+

◉ If the only Non Cash Charges is Depreciation.... Answer: Note that:
Non Cash Charges can also include asset depletion, stock-based
compensation, and asset impairments


◉ Estimating FCFF - From EBIT. Answer: FCFF = NI + Dep + Int (1 -
Tax rate) - FCInv - WCInv


And,


NI = (EBIT - Int)*(1 - Tax rate)
= EBIT *(1 - Tax rate) - Int *(1 - Tax rate)


Thus,


FCFF = EBIT *(1 - Tax rate) + Dep - FCInv - WCInv


◉ Estimating FCFF - From EBITDA. Answer: NI = (EBITDA - Dep -
Int)*(1 - Tax rate)

,= EBITDA *(1 - Tax rate) - Dep *(1 - Tax rate) - Int *(1 - Tax rate)


Thus,


FCFF = EBITDA *(1 - Tax rate) + Dep *(Tax rate) - FCInv - WCInv


◉ Chapter 3. Answer: Calculating the WACC


◉ Valuation Overview


Chapter 3. Answer: Essence: Intrinsic value equals the sum of
present value of discounted future cash flows


The tricky part is the estimation of the "discounted factor"


This chapter deals with the estimation of the discount factor, WACC
and r(E)


◉ Weighted Average Cost of Capital (WACC)


Chapter 3. Answer: - Risk-adjusted discount rate for firm's future
FCFs

, - The WACC estimate should be forward-looking in nature


- Ideally we want to estimate expected WACC


◉ Weighted Average Cost of Capital. Answer: WACC = (E / E + D) +
r(E) + (D / E + D) * r(D) * (1 - Tc)


Where,


E = market value of the firm's equity


D = market value of the firm's debt


Tc = firm's corporate tax rate


r(E) = firm's cost of equity


r(D) = firm's cost of debt


◉ 3.2 Computing the Equity Value, E. Answer: Equity Value = Share
price x Shares outstanding