While valuing the equity of Rio National Corp. (see CFA Problem 9), Katrina Shaar is considering the use of either cash flow from operations (CFO) or free cash flow to equity (FCFE) in her valuation process.

a. State two adjustments that Shaar should make to cash flow from operations to obtain free cash flow to equity.

b. Shaar decides to calculate Rio National’s FCFE for the year 2022, starting with net income.

Determine for each of the five supplemental notes given in Table 18H whether an adjustment should be made to net income to calculate Rio National’s free cash flow to equity for the year 2022, and the dollar amount of any adjustment.

c. Calculate Rio National’s free cash flow to equity for the year 2022. P-69