Assignment 34 P132 comprehensive problemD answer FCFE=cash flow from operations-capital spending +sale of fixed assets+debt issue -debt repaid= $185-100+30+100-50=$165. How can we get debt repaid 50, since I don’t see any information. and why FCFE need to count debt in? Since FCFF is the cash available to all investors, both equity owners and debt holders, FCFE is available for distribution to the common shareholders after all obligations have been paid. what is the difference between FCFE and FCFF? thanks.
FCFF by itself means Free Cash Flow for the firm. and The firm consist of both shareholders and creditors. FCFE means Free Cash Flow Equity which means cash available onlt to equity invesrors which are the shareholders. That is why you have to substract Debt payment from the cash to end up the cash that is could paid as dividend to shareholders or could be reienvested to increase shareholders wealth.
How can we get debt repaid 50, since I don’t see any information. Mortgage before 20x6 = 585 Mortgage after 20x7 = 535 Difference = 50 – Debt repaid. Just be careful when you read that entire bunch of numbers. To confuse you, they have the later year on the inner column and the earlier year in the outside column. CP
thanks for clear explanation.
FCFF goes to both debt and stock holders. FCFE is just to guys that own the common. CAPM is ur disct rate for FCFE, use WACC for FCFF