Hello,
before I get to my real question, first:
What is the difference between FCFF value (as calculated by PV(future FCFFs)) and EV (as calculated: Mkt value of Equity + Mkt Value of Debt - Cash) ?
(if you say one if intrinsic and one is market value than we’re on the same page here, keep on reading)
second, my question is on Equity (intrinsic) Value, following the CFAI it’s:
Equity Value = Firm Value - Mkt value of Debt
why don’t we add the CASH ? because
from the equation above for EV, we get Equity value = EV - Mkt value Debt + CASH, so assuming EV = FCFF value, we should normally get the intrinsic Equity value…
I tried to make my point as clear as possible, if you need more details please let me know…
I really think it’s a good point to know for the exam…
thank you for your answer