Negative unlevered free cash flow

Hi there,
I have just started with a corporate finance course and try to interpret some Cash Flows.
Could you tell me what a negative value of an unlevered free cashflow mean for a claimant of a firm? Thanks in advance!!

 

Agree with @CMoore0520, but to specify use maintenance capex or you could use EV/EBIT as the Company will be depreciating the assets that it has chosen to keep on the balance sheet.

Also, does the Company sell it's equipment at a certain age? I've seen businesses that do that and you would want to incorporate equipment sales as well. Maybe a longer term modelling approach.

Are there contracts for the leases? If so, then there are asset-based securitization facilities (e.g., Equipment Lease-Backed Notes). The ability for the business to raise debt could provide you the floor for valuation.

Play the long game - give back, help out, mentor - just don't ever forget where you came from. #Bootstrapped
 

So, its becoming a leasing biz. Be creative & come up with alternative valuation methodologies.

I would likely use a multiple of EBITA (no D). This effectively amortizes the upfront investment over the life of the lease.

You should also look at ROI of the equipment under the lease structure.

Array
 

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