Does this all sound about right? Doing some DCF’s for the first time in a while here… FCFF - FCFF = EBIT * (1-tax) + Dep - ∆WC - Capex - Discount rate is weighted debt and equity rate - terminal exit multiple is something along the lines of ev/ebitda? - Sum of discounted CF’s is Firm value, so then I subtract debt and add back cash to find equity value? I also have some DB plan liabilities, maybe subtract those out as well? FCFE - FCFE = NI + Dep - ∆WC - Capex + Net Borrowing - Discount rate is equity rate (CAPM) - terminal exit multiple is something along the lines of PE ratio? - Sum of discounted CF’s is Equity value? Again, subtract out DB plan liabilities? thanks in advance…
Finance 101
FCFF is the value attributed to all providers of capital including debtholders and equity holders too. So u hv to remove tax shield and NWC/Capex for future projects. Therefore use WAAC for discounting FCFE: is value to equity holders only. so u have to use ke as the discount rate Dobs