Series 79 practice questioneasyDCF - Projecting Free Cash Flows
When projecting free cash flows for a DCF, which of the following is typically subtracted from after-tax EBIT (NOPAT)?
- ADepreciation and amortization
- BCapital expenditures✓ Correct answer
- CInterest expense
- DDividends paid
Explanation
Why B — Capital expenditures
Capital expenditures (capex) are subtracted as they represent cash invested in fixed assets. Depreciation is a non-cash add-back, interest expense is not included in unlevered FCF, and dividends are not part of the calculation.
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