Fundamentals of Corporate Finance (4th Edition) (Berk, DeMarzo & Harford, The Corporate Finance Series)
Fundamentals of Corporate Finance (4th Edition) (Berk, DeMarzo & Harford, The Corporate Finance Series)
4th Edition
ISBN: 9780134475561
Author: Jonathan Berk, Peter DeMarzo, Jarrad Harford
Publisher: PEARSON
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Chapter 9, Problem 2CT
Summary Introduction

Pro Forma Incremental Earnings: Pro forma incremental earnings also known as pro forma statement which will show the firm’s financials based on a given set of hypothetical assumptions and not on the actual information.

Pro Forma Free Cash Flow: Pro forma free cash flow is the incremental effect of a project on the firm’s available cash. Pro forma free cash flow is the expected inflow or outflow of cash related to a project.

To determine:

Difference between pro forma incremental earnings and pro forma free cash flow.

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