Guys I was thinking, that the share value should be the same under both methods : 1)if we calculate FCFF and then deduct the Market value of Debt and then divide it by the nomber of shares. 2)or the other way, is to clalculte the FCFF and then deduct interest expense and then add net borowing so that u arrive to FCFE and then divide by nomber of shares to reach share price, - but the difference in price is very large , take for example the question Nomber 33 and 34 in reading 42 in the curriculum. What’s worng here ? what do you think ? is it OK to be that big difference ?!!
NOBODY KNOWS !!!
guys, aren’t there REALLY any body to help me in this little dilemma!!! HELP PLEASEEEEEEEEEE
amrcd1 Wrote: ------------------------------------------------------- > guys, aren’t there REALLY any body to help me in > this little dilemma!!! > HELP PLEASEEEEEEEEEE call me
in this particular problem 1. fcff and fcfe are growing at different rates 2. fcfe and fcff may show different values because of the amount of debt / interest paid by the company and the amount of net borrowing the company does. fcfe = fcff - int (1-t) + Net borrowing. if interest amounts are large - the fcfe would be lower than fcff (provided the net borrowing is not as much, and also the company is not paying down debt). these are reasons why I feel fcff and fcfe may not provide the same valuation.