Question

excerpt from book: "in the case where the capital expenditures and the working capital are expected to be financed at a fixed debt ratio d, and principal repayments are made from new debt issues, the FCFE is measured as follows: FCFE = Net Income + (1-d) (Capital Expenditures - Depreciation) + (1-d) D Working Capital".

should the equation not be: FCFE = Net Income - (1-d) (Capital Expenditures - Depreciation) - (1-d) D Working Capital? thanks

Answer 1

Yes. That was my mistake.

Answer 2

thanks.