If an airline sells 100 aircraft at $20m each, what is the effect on free cash flows?
I have read that CAPEX cannot be negative, so in the standard FCF formula I assume this would not be reflected in CAPEX.
| +370 | Evercore Intern Seizure | 54 | 14h |
| +71 | JPM M&A is Gone??? Purely Coverage Banking??? | 31 | 13h |
| +62 | Is DCM actually underrated ? | 24 | 1d |
| +51 | How do I understand vs. just memorizing? | 8 | 4h |
| +48 | Losing my personality in Banking | 9 | 1d |
| +47 | Are all Tech / TMT groups sweaty? | 38 | 1d |
| +42 | Associate & Above IB exits | 16 | 4d |
| +33 | Incoming IB Analyst: Best Ways to Prepare? | 11 | 5h |
| +27 | Which groups are ideal for laterals? | 12 | 1d |
| +24 | Thoughts on PEI Global Partners? | 4 | 1d |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
Gain or loss from sale of assets should be reversed on CFO section (i.e if sale price>BV then the gain should be subtracted from when calculating Op. Cash flows and vice versa for loss on sale). On Investing cash flows, you should recognise the total sale value of the asset with a positive sign (inflow) which will partially offset capex for the year. For FCF, you need to account only for the non-cash portion (gain or loss on sale) just like you did on Op. Cash flows. Capex will take care of itself since it will be lower (net capex).
Thank you! Okay, if we have the following formulas:
FCF = EBITDA - D&A* 1-τ+ D&A - CAPEX - ∆NWC
Gain (loss) on sale = Sale price - (Purchase price - Accumulated depreciation))
Then the gain (loss) would be added to (subtracted from) EBITDA, correct?
And I would imagine that D&A in the future is affected as well, assuming that the airplanes were not fully depreciated?
These things would further impact tax expense, but I think CAPEX and NWC should be unchanged.
I could easily be wrong in any of the above, so would really appreciate if you would correct me! :-)
Et distinctio ut hic nobis voluptatum laboriosam. Facilis rerum animi excepturi et molestias.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...