Just quick question here,
I have seen an expression “the present value of future FCFFs equals to EV”
I am just wondering logic behind this.
Just quick question here,
I have seen an expression “the present value of future FCFFs equals to EV”
I am just wondering logic behind this.
So see it this way. EV is the value that belongs to all the providers of capital to a firm. FCFF is the cash available for all providers of capital.
EV is the present value of future cashflows available to all the providers of a firms capital. Hence, a discounted FCFF = EV.
EV formula does NOT include cash though