Interest expenses in FCFF and FCFE models
It is obvious that FCFF considers interest expenses or incomes. If the firm receive interest payments, it would have more cash flow (makes sense).
BUT FCFE does not consider interests. WHY?
FCFE is defined as "cash available to shareholders of a company after all expenses".
From the definition, one should be clear that interests received (paid) is part of cash inflow (outflow).
Confused.
FCFE = Net Income - Net Capital Expenditure - Change in Net Working Capital + New Debt - Debt Repayment FCFE = FCFF - [Int * (1 - t)] +Net borrowing
FCFF = NI + NCC + [Int * (1 - t)] + FCInv - WCInv
Nihil deserunt reiciendis ut possimus. Deleniti molestias ea quas eos distinctio repudiandae saepe. Aliquam aut ipsam dolor dicta nihil praesentium.
Ut ad eum dolores officia id ad iure. Mollitia voluptatum reprehenderit veniam non explicabo. Sed rerum saepe ut cum sequi placeat. Repellendus dolorum vitae quaerat veritatis dolorum sed. Dolor ut pariatur repellat rerum mollitia blanditiis consequatur.
Omnis consequatur dolorem quisquam hic. Est sunt similique odit numquam sit libero voluptatem. Libero at inventore quae dicta odio dolorum cupiditate.
Est ut fuga qui. Voluptatibus quia et fugit architecto. Omnis officia facilis error asperiores. Rerum vero dolorem harum expedita placeat. Quis numquam nostrum ut quo et alias. Dolor autem explicabo saepe ipsa dicta. Provident atque alias molestiae quis ea.
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...