- This topic has 1 reply, 2 voices, and was last updated 8 years ago by .
Viewing 2 posts - 1 through 2 (of 2 total)
Viewing 2 posts - 1 through 2 (of 2 total)
- You must be logged in to reply to this topic.
OpenTuition recommends the new interactive BPP books for June 2024 exams, Get your discount code >>
Hi sir
Looking back over past exam solutions, I have not seen any examples where the actual formula for FCF To equity was needed (as per the bpp formula in their text book) to value equity.
It seems to be to case that the FCF formula (pbit less tax less CA less WC add depreciation) was used to calculate the value of the whole firm, and then the value of debt was subtracted. Would this method for calculating FCF to equity be applicable for most questions?
Thanks
What you call the ‘formula’ is an approximation to FCFE if we don’t have enough information to actually list all the cash flows.
If you have the cash flow information then you should use it (and not use the ‘formula’).