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Firm value vs equity value

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Firm value vs equity value

  • This topic has 3 replies, 2 voices, and was last updated 10 months ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • September 2, 2024 at 3:08 pm #710639
    Aleksandra19900107
    Participant
    • Topics: 22
    • Replies: 28
    • ☆☆

    Dear Mr. Moffat,

    solving the MOCK I realized that I still mix total value of the firm and equity value.

    Would it be correct, if I summarize the following (?):

    Firm value:

    1. If I use free cash flow to firm (where I ignore % and use WACC, can also include growth model of free cash flow) – would give me firm total value and I must substract market value of debt to arrive to the equity value

    2. In all other cases:
    – bootstrapping P/E to earnings
    – using growth model based on PAT
    – free cash flow to EQUITY (including % expense and discounting at cost of equity)

    would give me directly cost of equity and no substracting of debt is needed.

    Would it be the correct summary?

    Thank you!

    September 3, 2024 at 7:05 am #710680
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54701
    • ☆☆☆☆☆

    Yes, that all seems to be correct 🙂

    September 3, 2024 at 8:09 am #710692
    Aleksandra19900107
    Participant
    • Topics: 22
    • Replies: 28
    • ☆☆

    Thanks you so much!

    September 4, 2024 at 8:10 am #710735
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54701
    • ☆☆☆☆☆

    You are welcome 🙂

  • Author
    Posts
Viewing 4 posts - 1 through 4 (of 4 total)
  • The topic ‘Firm value vs equity value’ is closed to new replies.

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