Debt Repayments in a DCF
Could someone explain to me why paying off the minimum debt in using Levered FCF is better than paying off the debt more quickly in a DCF.
Trending Content - Investment Banking Forum
| +239 | Return Rates For Interns Are Falling? | 99 | 2h |
| +131 | UBS Americas IB: The Kids’ Table of Wall Street | 18 | 1h |
| +111 | I am a drunk MD AMA | 39 | 12h |
| +64 | VP Lifestyle at Top BB Coverage Groups | 40 | 1d |
| +57 | An Outsider’s View of RX Banking Out of College | 6 | 4d |
| +55 | UBS Offer Day | 23 | 1h |
| +49 | SharePoint makes IB hours HELL | 15 | 3d |
| +39 | WF Return offers | 26 | 2h |
| +34 | No return offer - feeling like a failure is an understatement | 14 | 3h |
| +31 | Article: Why UBS's Asian M&A bankers are thriving and UBS's American M&A bankers are not | 3 | 54m |
Career Resources
If you spend your excess cash flow to pay off debt, then you're not realizing that cash flow as profits. The point of using that debt is to buy assets for as low a price (in terms of equity) as possible and use the cash flow you get from the asset to pay off the debt just enough that you don't default but can still pocket as much profit annually as you can. Then, when you sell the asset or refinance the asset you take those proceeds to pay off the original debt and either realize total profits of the investment or refi into more attractive debt terms that allows you to keep the asset cash flowing.
If you pay off the debt ASAP, then you might as well have not used debt at all for the purchase of the asset.
Nobis voluptatem dolorem culpa vel corporis. Officia quidem qui eligendi ea ipsa et pariatur. Itaque reprehenderit officia sapiente a nisi itaque in.
Aut dolorem commodi et voluptate. Ullam consequuntur provident eligendi maxime dolorem ipsam. Ex est vel sed rem ullam. Assumenda suscipit facilis dignissimos ab est magnam omnis. Quos natus sit ut sequi doloremque sunt.
Aut quo rerum sunt est. Perspiciatis cupiditate accusamus sit consequatur et praesentium. Ducimus voluptas dolorem corrupti omnis minus et quo.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...