FCFE-based valuation with negative EBITDA?
reading 58, Practice problem #35:
A private equity fund is estimating the value of a privately held company that
is financed with both debt and equity, is generating positive revenues, and has
negative EBITDA. The private equity fund is most likely able to estimate the
company’s equity value using:
C) expected free cash flow to equity and cost of equity.
I dismissed this answer because it did not seem probable to have positive FCFE given negative EBITDA and debt payments. Can anyone help me find the flaw in my logic? Anyone seen sth like this in the wild?
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