8. Answer the following questions pertaining to the formulas for estimating the FCF of a firm in a

particular period:

a. There are two formulas for estimating FCFs of a firm (see below). Start with formula 1 and use

accounting equations to show that formula 2 will lead to the same answer (i.e., the two equations

are identical).

Formula 1: FCF = NOPAT + Depreciation - CAPEX - Investment in NOWC

Formula 2: FCF = NOPAT - NIOC

b. How would calculating future FCF change if the

firm i) currently has Pension liabilities and you expect to pay it off by the time the firm matures

and ii) currently has Goodwill (due to acquisition activities) but you believe the firm will not

engage in any additional significant activities?