Sign up  |  Log in

FCFF and Minority Interest

Hi Guys… I am calculating the FCFF as follow: EBIT(1-T) + Dep and Amort - Capex- Change WK…

Mi doubt is.. if the company consolidated result that no belong to them (minority interest from P&L) Should I deduct it from the FCFF?? because then when I calculate the Equity Value, I subtract the Minority Interest from Balance Sheet.

Thanks!!

Make the most of your CFA® Progam prep in one weekend! Join renowned instructors, Peter Olinto, Darren Degraaf & David Hetherington in May for a live, two-day intensive final review class.

The firm value includes the minority interest value. We are talking about the whole firm here. So you must not deduce nothing.

Common equity, on the other hand, considers only common equity. Sounds stupid for the simple this is, but is true. Minority interest is not part of common equity.

Las almas de todos los hombres son inmortales, pero las almas de los justos son inmortales y divinas.
Sócrates

JPEREZAR wrote:
Hi Guys… I am calculating the FCFF as follow: EBIT(1-T) + Dep and Amort - Capex- Change WK…

Mi doubt is.. if the company consolidated result that no belong to them (minority interest from P&L) Should I deduct it from the FCFF?? because then when I calculate the Equity Value, I subtract the Minority Interest from Balance Sheet.

Thanks!!

Minority interest isn’t cash flow.

It doesn’t come into play in calculating FCFF or FCFE.

Simplify the complicated side; don't complify the simplicated side.

Financial Exam Help 123: The place to get help for the CFA® exams
http://financialexamhelp123.com/