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Free cash flow to firm

This topic has 3 replies, 2 voices, and was last updated 5 years ago by John Moffat.

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July 27, 2019 at 6:09 pm #525065
Saimon
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Sir
I have a confusion in tax computation that we calculate in computation free cash flow to firm or equity
My confusion is should i consider interest cost for tax calculation to use it in FCFF or should i ignore it and calculate tax on profit before interest.
July 27, 2019 at 8:28 pm #525076
John Moffat
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For FCFF you ignore interest and the tax saving on the interest (so yes – calculate tax on the profit before interest).
August 19, 2019 at 5:57 pm #528131
Saimon
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What should i do in case of FCFE?
(Meaning Should i consider interest for tax computation or should i ignore it???)
August 20, 2019 at 6:10 am #528169
John Moffat
Keymaster
- Topics: 57
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With FCFE you take the cash flow after interest and after the tax saving on the interest. i.e. the cash left for shareholders.
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