Free Cash Flow & Related Formulas

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Flashcards for Free Cash Flow & Related Formulas

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12 Terms

1
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Free Cash Flow to the Firm (FCFF)

EBIT × (1 - Tax Rate) + Depreciation - CapEx - Change in NWC

2
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Free Cash Flow to Equity (FCFE)

Net Income + Depreciation - CapEx - Change in NWC + Net Borrowing

3
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Weighted Average Cost of Capital (WACC)

(E / (E + D)) × rE + (D / (E + D)) × rD × (1 - T)

4
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E (in WACC formula)

Market value of equity

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D (in WACC formula)

Market value of debt

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rE (in WACC formula)

Cost of equity

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rD (in WACC formula)

Cost of debt

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T (in WACC formula)

Corporate tax rate

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Firm Value

∑ [FCFFₜ / (1 + WACC)ᵗ] + Terminal Value / (1 + WACC)ⁿ

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Terminal Value (TV)

FCFFₙ₊₁ / (WACC - g)

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Equity Value

Firm Value - Debt

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Net Present Value (NPV)

∑ [FCFₜ / (1 + r)ᵗ] - Initial Investment