FCFF vs. FCFE vs. FCF
Hey guys,
The difference between FCFF and FCFE is obvious but very often we see just FCF - what does it mean and how does it differ from either FCFF and FCFE? Many thanks!
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FCFE = FCFF + Net borrowing - Interest*(1-t)
and solely FCF?
I have this in example just mentioned FCF and I don't get it why there are added back tax savings and tax shield to the EV/Equity. Normally we are not doing that right?
FCF would either refer to FCFE or FCFE, there isn't a 3rd FCF (Maybe someone would say statement of cash flows is a 3rd FCF, but I haven't seen that). In terms of the tax savings, the only thing I could imagine is if you had a NOL somewhere in that that wasn't in the FCF?
Since this result gives you enterprise value (not equity value) when you sum the discounted cash flows and terminal value, you know this is FCFF. Another trick is to check the discount rate: If the question is using WACC, it's FCFF. If it's Re, then it's FCFE.
FCF is synonymous with FCFF. No difference.
FCFF is what you forecast in a standard DCF
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