FCFE DCF -- Do you add back cash?
When valuing a stock using a DCF and FCFE, would you add back cash like you would for a DCF using FCFF or would it already be included in the present value of the cash flows? What about subtracting debt?
Thanks!
Will start by saying that standard practice is to use FCFF (unlevered FCF) for DCF analysis because it is capital structure neutral. If for some reason you are asked to use FCFE (levered FCF) you would not adjust for cash or debt because the discounted value you get is already the equity value. Also need to make sure to use the cost of equity as your discount rate, not WACC.
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