Is FCFE = FCFF – Interest +/- debt drawdown/repayment?
Your formular for FCF at page 56 of course note.
FCF = EBIT – Tax on EBIT …
ie apply tax rate on EBIT or EBT (deduct interest first before apply tax rate)?
Since I saw an answer applying tax rate on EBT? Which one is correct?
Looking forward to hearing from you. Many thanks
The tax should normally be applied to EBIT. The reason is that you are then going to discount at the WACC, and the WACC takes into account the after tax cost of debt.
How about my 1st question: FCFE = FCFF – Interest - debt drawdown/repayment?
is that correct? since some question they wanted to value FCFF & some to value FCFE
Sorry. Yes – your first equation is correct.
I am highly appreciated your help to us. Thank you & thank Open tuition so much.
You are welcome
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