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.

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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?