Hi everyone,
I was asked recently to project FCF for a bank, but I have not done a lot of modelling before. While I do know the formula for FCF, My question would be how to project its components into the future (i.e EBIT, Capex, etc.) in order to calculate. Would you assume a constant growth rate for all items on the financial statements and move them forward ?? any help on this would be greatly appreciated.
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you can't use EBIT/EBITDA for banks becuase they make their money through the interest spread and by definition EBITDA doesn't include it. you use their dividend payments as a proxy instead
Can't you use the Operating Income on the Income statement as a proxy to EBIT ?
As always: www.stern.nyu.edu/~adamodar/pdfiles/papers/finfirm09.pdf
If we get lucky Mr. AD will comment here himself...
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