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By · Friday, November 6th, 2009

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DCF valuation?

I'm trying to figure out free cash flow of a company for the DCF analysis. I am having trouble calculating the operating expense. From non-financial background, I am finding information on websites that are inconsistent. A sample I got from BusinessWeek for Dredging Corporation of India is as follows: Year: 2007 Tot Rev 5728.9 sales COGS 2870.4 Genl & Admin Exp Tot Dep & Amor 373.2, 365.8 Others 560.6 Tot Op Exp OTHER OP EXP, TOT Op 1299.6 Revenue Exp 1558.9 Interest Income -21 Int and Inv 365.9 NET INTEREST EXP 345 Other Non-Op Income (Expenses) 154.9 EBT, INCLUDING UNUSUAL ITEMS 2063.4 Margin Op 33.8 1. Op Cost = Cost of Sales + OTHER OP EXP, Tot – Dep & Amr, Tot = 2870.4 + 1299.6 = 4170 2. Cost Op = Tot Rev – EBT = 5728.9 to 2063.4 = 3665.5 2. Cost op = (100 – Op Margin) / 100 * – 33.8 Rev = (100) / 100 * 5728.9 = 3792.53 Can you suggest which securities can be used as the operating cost for the DCF analysis? Thank you.

First, it depends on whether you're trying to calculate the debt-free cash flow or free cash flow of the shareholder. but gives a total operating expenses in question. It is your selling, general and more Depr and love, plus other operating expenses. Its operating income is equivalenet EBIT, as interest expense is a line below operating income. Therefore cash flow (on a debt free basis, which means that you have to Calc WACC used in the PV) is: EBIT – Change in net working capital – Capital Expenditure + Depreciation / Amort + Other non-cash charges. I do not see or information CAPX Capital Working, so only add EBIT ($ 1,558.9) to Depre / Amort ($ 365.8) = $ 1,924.7 should also eliminate unusual items, which in this case are equal to $ 694.5, to normalize their cash flow. This is calculated by taking operating income less net interest expense plus other non-op, to enter the EBT. but he said that the articles w / unusual (in this case a gain), EBT card is $ 2063.4. so the real difference between the EBT, which was around of $ 1.3000 and $ 2063.4 must be added back to cash flow. This results in adjusted gross cash flow of $ 2619.3. Note: this is not the same free cash flow, b / c CAPX have not accounted for or the change in working capital.

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