Hey everyone!
Could you be so kind to explain me 1 thing.
Why doesn’t equity infusion affect FCFE?
Imagine a company with Cash 100 and Equity 100. Calculating EV gives us 0, but further adjustments for cash would lead to Equity value = 100 (EV +Net debt = 0 + 100). But in case we calculate FCFE and determine equity value through FCFE discounting would result in equity value = 0.
So why doesn’t we take into account equity infusion for FCFE calculation?
Thanks in advance!