When do you use FCFF vs FCFE?

FCFF is for enterprise valuation (discount at WACC to get EV). FCFE is for equity valuation (discount at cost of equity to get equity value). FCFF is preferred when capital structure changes over time.

Why add back interest in FCFF?

FCFF represents cash flows before financing decisions. Interest is a financing outflow to debt holders. Adding back after-tax interest gives the pre-financing cash flow available to all providers.

What is normalized working capital change?

Use long-term averages rather than single-year changes. NWC = Current Assets excluding cash minus Current Liabilities excluding short-term debt. Growing businesses typically use cash for NWC increases.

Free Cash Flow to Firm (FCFF) Calculator

Calculate FCFF: Net Income + D&A + Interest x (1-T) - CapEx - Change in Working Capital. Cash flow available to all capital providers before financing decisions.

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Frequently Asked Questions

When do you use FCFF vs FCFE?

Why add back interest in FCFF?

What is normalized working capital change?