FCFF recognises the gross fixed capital investment and subtracts the amount from cash available to capital providers.My question is why does it not recognise that specific debt could have been raised and therefore would not reduce the cash available to service debt .
Debt is recognized in Net a Working Capital… Or Current Assets - Current Liab. Since change in NWC is subtracted from FCF this would account for an increase in CL.
Calculations of FCFF do not take financing decisions into account. It is a “pre-debt and equity issues, repurchases, interest, dividends, and payouts” measure. Using debt to finance fixed assets WiII make FCFE greater (relative to not using new financing for the Capex). But it doesn’t affect FCFF.