FCFE = NI - (1 - DR) * (FCInv - Dep + WCInv) Equation

Sorry, this is probably a really basic question for most of you.

I keep getting confused about when and when not to use this equation. Can someone clarify what the appropriate context is for using this equation.

Is it just for forecasting? Is the hard and fast rule that you use this equation when they say “forecast FCFE” or do we use this when certain other information is missing?

You use this equation whenever you need to calculate FCFE and you are not given net borrowings.

If they need us to use this in forecasting, we’d be told company xyz maintains a target capital structure of X% debt and Y% equity … calculate FCFE in year 3.

Again, the missing item here will be net borrowings or details on how net borrowing may change in a forecast.

Got it, only use when there is not enough info given.

Thanks again for you help bloodline.


You are welcome man.

Soak it all in now, you’d miss these miserable times when it’s gone. As horrible as it is, it does leave its own Nostalgic feelings in the end. That’s why you find some of these Charterholders roaming these boards, they secretly wish they were us. We are the lucky ones mate. The ones lucky to be miserable.

Captures my sentiments at this point in time PERFECTLY!!!

Well done sir!

FYI: Whenever I see a post from you, I still think of the guy from the IT crowd…

Yeah, I know exactly what you mean. As much as this is painful, there’s something about it which I’m kinda enjoying. I can’t really explain it. Something to do with a feeling of slaying the beast, slowly with every concept I’m understanding and every formula I remember, I’m winning this f’in battle that seemed so impossible at first.

yeah, I had to ditch that avatar. Wasn’t mean looking enough to match my feelings towards level 2. I’m kicking ass now and not taking any prisoners.

I’d like to take this to heart, but while in the thick of it, it’s just so hard!