Say somehow you know a company will be pursuing an aggressive acquisition policy going forward with its cash balances, or will be purchasing a lot of marketable securities with its cash in the future.
Both of these represent investing cash flows, but it's not reflected in FCF since they are not capex. So how would you account for it in a DCF?
| +240 | Return Rates For Interns Are Falling? | 100 | 1h |
| +131 | UBS Americas IB: The Kids’ Table of Wall Street | 18 | 4h |
| +111 | I am a drunk MD AMA | 39 | 14h |
| +64 | VP Lifestyle at Top BB Coverage Groups | 40 | 1d |
| +59 | UBS Offer Day | 23 | 4h |
| +57 | An Outsider’s View of RX Banking Out of College | 6 | 4d |
| +49 | SharePoint makes IB hours HELL | 15 | 4d |
| +41 | Article: Why UBS's Asian M&A bankers are thriving and UBS's American M&A bankers are not | 6 | 20m |
| +39 | WF Return offers | 26 | 5h |
| +34 | No return offer - feeling like a failure is an understatement | 14 | 6h |
Career Resources
Get instant access to lessons taught by experienced private equity pros and bulge bracket investment bankers including financial statement modeling, DCF, M&A, LBO, Comps and Excel Modeling.
both of the examples you gave do not affect the firm value, so you do not account for them when doing a dcf. dcf is done by simply discounting the fcf of the unlevered firm to arrive at a firm value. in the examples you gave, the firm produces fcf; how those cash flows are spent is irrelevant. when computing firm value, all that matters is the quantity of fcf generated.
the only reason to include cash expenses in your dcf is if those cash expenses would be needed to generate the revenues you are modeling. if they are discretionary then you do not need to include them
I'm confused. How does that not affect the amount of cash available for distro to capital providers? If each year, you KNOW the company will need to use its cash to buy a new operating subsidiary or other investments.....doesn't that mean less cash flow to equity?
Qui et quis et illum corporis quo corporis est. Est corrupti qui ut nemo veniam velit. Similique expedita architecto expedita magnam a culpa. Deserunt rerum qui id quod error fuga qui. Id iure sint tempore earum et laborum reprehenderit. Optio expedita porro labore sunt architecto.
Quis et delectus eum recusandae voluptatum magni illo. Temporibus alias magni repellat in. Doloribus odit est qui atque reprehenderit numquam voluptatibus. Dolor cumque voluptate sint.
Exercitationem quia dignissimos voluptas qui. Aut occaecati ea odit quas. Rem accusantium enim sapiente commodi.
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...