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Value of Entity

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Value of Entity

  • This topic has 1 reply, 2 voices, and was last updated 8 years ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
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  • July 20, 2017 at 2:58 pm #397795
    cys94
    Member
    • Topics: 30
    • Replies: 29
    • ☆☆

    Dear John,

    By using the free cash flow to firm or free cash flow to equity model, we are actually computing the value of equity or entity of the company? Is it that the value of entity equals to the value of equity + value of debt?

    July 21, 2017 at 7:25 am #397876
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54774
    • ☆☆☆☆☆

    Discounting free cash flows at the WACC gives the value of the company (equity plus debt).
    Discounting free cash flows to equity at the cost of equity gives the value of the equity.

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Viewing 2 posts - 1 through 2 (of 2 total)
  • The topic ‘Value of Entity’ is closed to new replies.

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