Can someone explain this question? IB interview prep, thanks.
"With a DCF analysis, if you include an expense within FCF you should exclude the corresponding asset or liability when moving from implied Enterprise Value to Implied Equity Value."
Why is it that if I project UFCF by factoring in operating leases as a non-cash expense, lowering NOPAT and Operating Income, I cannot capitalize the operating leases and subtract them as a debt-like item when moving from Implied Enterprise Value to Implied Equity Value? Why would this be double-counting?
Thanks WSO.
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