How does FCFE relate to dividends?

FCFE represents the maximum dividends a company could pay. Actual dividends may be less if management retains cash. Over time, dividends must approximate FCFE or the stock becomes mispriced.

What does negative FCFE mean?

The company is consuming equity capital. Common for high-growth or capital-intensive businesses. May be funded by issuing new equity or drawing on cash reserves.

What discount rate to use for FCFE valuation?

Cost of equity from CAPM or other equity pricing models. FCFE is levered (after debt service), so discount at the equity risk rate, not WACC.

Free Cash Flow to Equity (FCFE) Calculator

Calculate FCFE: Net Income - CapEx + D&A - Change in Working Capital + Net Borrowing. Cash flow available to equity holders after all reinvestment and debt service.

Principal ($)

Annual Rate (%)

Years

Compounding / Year

$ Finance Disclaimer: These calculators are for educational and illustrative purposes only. Results do not constitute financial advice. Consult a licensed financial advisor before making investment or borrowing decisions.

How to Use

Enter the values for the scenario you are assessing. Calculate FCFE: Net Income - CapEx + D&A - Change in Working Capital + Net Borrowing. Cash flow available to equity holders after all reinvestment and debt service. Use the fcfe calculator result to inform your calculation.

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Frequently Asked Questions

How does FCFE relate to dividends?

What does negative FCFE mean?

What discount rate to use for FCFE valuation?