Question $14$ of $34$

You are calculating Unlevered Free Cash Flow $($UFCF$)$ for Vivendi, a French media$/$telecom company that follows the IFRS

accounting standards.

You plan to start the calculation with EBIT, multiply by $(1-$Tax Rate$),$ add back non$-$cash charges such as Depreciation &

Amortization, add or subtract Deferred Taxes and the Change in Working Capital, and subtract CapEx. You will also deduct

the full Operating Lease Expense.

Shown below are the main components of this calculation, all taken from the company's Cash Flow Statement and the notes

to the financial statements: Which of the following is a POTENTIAL PROBLEM with this UFCF calculation if you use these numbers from the statements

as$-$is$,$ without any adjustments?

A$)$ You can't necessarily add back the entire D&A figure because under IFRS, some of it will be the Depreciation or

Amortization element of the company's Operating Lease Expense.

B$)$ You need to adjust EBIT so that it deducts the Interest element of the Operating Lease Expense.

C$)$ Some of the Amortization may be the Amortization of Financing Fees or Debt Discounts, so you should not add back

those portions.

D "Content investments, net" should not count as a part of the Change in Working Capital because non$-$media$/$telecom

companies do not have this line item.

E$)$ All of the above.

F$)$ Answer choices A and B$.$

G$)$ Answer choices A$,$ B$,$ and C$.$

H$)$ Answer choices A$,$ B$,$ and D$.$