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Free cash flow to firm
Why is Tax not deducted in FCFF? When we start the calculation at EBITDA we subtract CAPEX & Change in NWC. Why don't we also subtract the tax we have to pay? To get to the FCFE we then only subtract tax? Why is that the case?
Free cash flow to firm - Net debt
So I am a bit confused about when we calculate free cash flow to the firm, why do we not include net debt borrowings? For example, if firm ABC in Y1 has CFO = $1M, Capex = $500k and Net debt borrowings of $2M, then do they not have 1-0.5+2 = $2.5M in free cash flows to use between debt and equity...
Another FCF question
I’ve seen FCF calculated in the following ways in commercial underwriting: FCF=EBITDA - cash taxes - cashu interest - change in WC - CAPEX FCF=CFO - CAPEX - dividends how would you determine which to use?
Changes in Working Capital for FCF
I have seen the calculation for change in WC on CF stmt done many different ways for calculating FCF. For context, some FCF analysis I've looked at takes into account the change in all operating assets and liabilities from CF while others remove items such as change in Op lease liabilities from the...
Can I go from UFCF to LFCF? Help a monkey understand, please
Hi, I have an interview coming up and had a question about UFCF and LFCF. According to my textbook: 1) FCF = Cash flow to creditors + Cash flow to stockholders FCF = Operating cash flow - Net Capital Spending - Changes in net working capital where : UFCF* = EBIT - Taxes + D&A - CapEx - Changes in...
Use of debt and cash in DCF calculations and the use of levered vs unlevered FCF
Hi, I have been looking recently at how to calculate DCF to find the intrinsic value of a stock. However it is inconsistent whether or not to use total cash minus total current debt + long term debt and adding it to the sum of free cash flows. Also I am wondering whether for me, who is investing...
EBITDA to Levered Free Cash Flow?
Hi all, hoping you can help clarify something I've been stuck on: Is there a reason that when building to levered free cash flow starting from EBITDA we wouldn't use the after-tax interest expense? I'm looking at a previous version of a page someone put together that is calculating LFCF from EBITDA...
Levered Free Cash Flow Calculation
What do you do with the principle part of an amortizing bond when calculating levered free cash flow? I have heard/read about two aspects of levered free cash flow. The first is that it is cash flow available to equity holders. The second is that it is unlevered fcf - tax effected interest payments....
Free Cash Flow Iteration
To qualify this post I have about 6 months of LBO modeling experience. As a general rule, I calculate FCF for debt paydown as: FCFDP = NI + Depreciation + Amortization - Capex +/- Change in NWC I am aware there are multiple ways to think about arriving at a FCF calculation but am curious why it's...
What is the point of FCF if it doesn't include debt and interest payments?
Why does everyone look at free cash flow when the common formula (Total Cash Flow From Operating Activities - Capital Expenditures) does not take into account things like interest expense (or any taxes or debt payments at all?) Basically - who cares about a company's ability generate cash (before...
Valuation of consolidated company
Can someone please help me on how to value the equity of consolidated company (Parent) who has two investments in associate (Ownership ratio: 25% and 40%, respectively) whose business is core of the parent. these associate companies are accounted under equity method so equity pick-up is recorded in...
Help on DCF - Can you discount cash flows directly from the CF Statement
I have built an integrated operating model and am coming across a problem. Can you discount Unlevered Free Cash Flow directly from the cash flow statement? When I calculate Unlevered Free Cash Flow from EBIT, I am getting a different result than what is on the Cash Flow Statement. Part of the reason...
Interest Paid vs Net Finance Cost - Reformulated Cash Flow Statement
Hi WSO , I'm currently having to "reformulate" my financial statements (Anyone who has come across Penman's Financial Statement Analysis will understand) for Whitbread plc and one of my tasks is to rearrange the cash flow statement. I'm currently trying to find FCF . However I was wondering if...
How to grasp debt service from the financial statements? Is current portion long term debt a part of it?
Hi everyone. I have a question and thank you for your answer in advance. I have to calculate the debt service (to calculate debt service coverage and so forth) but I am not sure whether it includes the current portion of long term debt. I consider current portion of long term debt as the principal...
EBITDA vs. Operating Cash Flow vs. Free Cash Flow
Moderator note (Andy): this is a post from 2010 but squawkbox suggested its relevancy remains and can be very useful for those going through FT & SA interviews. "Don't beat it to hell because it's missing some small details, but it's good for what someone will need in the "hotseat" during the...
Why EBIT*(1-t)+D&A-Chng NWC-Capex is not equal CFO-CFI?
For one company I did both methods and arrived to substantially different numbers. My calculations are wrong or these two methods are designed to be different? Thx
Stock-based compensation and free cash flow
In Joshua Rosenbaum 's Investment Banking, free cash flow is calculated as: EBIT(1-t) + D&A - Capex - Increase/(Decrease) in NWC. Most sources present the formula for free cash flow this way, without any mention of stock based compensation. However, in the Breaking into Wall Street modules,...
How to handle infinite growth in a FCF model
I am currently building a model for a firm that grows at a constant rate for 5 tears, then after that, is expected to grow at 1% for infinity. how do i model the sales and FCF for that? Also, when building a model, does PPE grow at the same rate as sales? Would the same apply to LTD if no other...
Free Cash Flow and CAPEX
Hi! I'm working currently on my bachelor thesis about valuation using a DCF model. In this model the FCF is calculated according to the following procedure: EBIT - Adjusted taxes =NOPLAT + D&A - CAPEX -Changes in NWC =FCF Concerning the CAPEX: The capex should represent the specific amount of NOPLAT...
DCF with Negative Free Cash Flow
Guys, a quick question. I am doing a DCF for a utility power company and right now it has positive EBITDA but negative FCF due to very high Capex. Obviously I am assuming that it will generate positive FCF in the future( in line with equity research reports I read on the firm). My question is that...
Free Cash Flow Yield and PE/Earnings Yield
What's up all? I'd love any insights you can provide into the following questions... Would anybody be able to help me draw the realtionship between these two metrics? Can earnings yield proxy FCF yield? Which metric do you prefer...? Obviously they are measuring different things, but are there any...
FCF model suitability
Hey guys, I just wondering the suitability of free cash flow model for a corporation with a lot of investment in associates and joint ventures. As we all know, the FCF starts from EBIT which does not include the shared profit from associate and JV. However, if the shared profit from JV and associate...
DCF- Free Cash Flow to Firm/Equity HELP
Hi guys , just want to make sure a few facts straight here, 1, FCFF(Free Cash Flow to Firm) also called Unlevered FCF , FCFE(free cash flow to Equity) also called Levered FCF? 2, FCFF discounted by WACC ( cost of equity is calculated using unlevered Beta)=Enterprise Value FCFE discounted by Cost of...
Calculating FCF question
Which equation do you guys use and why? FCF = net income + amort/deprec - changes in working cap - cap ex or FCF = cash from operating - cap ex I know the two are theoretically equivalent. The internet has led me to believe that the first is old school, and the second is more accurate. I was...
For those good at calculating free cash flows
So free cash flow to equity is typically just cash flow from ops less capex (I guess some people include debt issued and repaid here as well), and free cash flow to the firm excludes interest expense but is similar. Let's say a company issued either debt or equity in a year and used the cash to...
cash from operations to free cash flow (firm)
Need help with valuation of Company XYZ
Negative Operating Income and FCF's
I'm building a DCF model. How do I calculate tax expense when Operating Income (EBIT) is negative to get to FCFs? Net Operating Loss Carry Forward [quote "dosk17 - Retired Investment Banker"]Basically here is what you do: As the posters said above, if you have negative operating income then you...
Calculating Free Cash Flow 5-10 years + Discount Rate?
Not a business student here and just trying to learn the DCF technique through online sources. So my question is, how do I project free cash flow for 5-10 years out for a firm. The source that I have been looking at states that you must look at the firms free cash flow from the year before and then...
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