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Thank you sir.
FCF to equity is discounted at the cost of equity and gives the market value of the equity.
FCF to the firm is discounted at the WACC and gives the total value of the firm (i.e. equity + debt).
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Im sorry my question was wrong.
Do they give same equity value?Yes they would but usually in the exam you do not have enough information to be able to do it both ways.
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Thank you 🙂
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Oh sir one more question.
Why do i feel that FCF to equity gives much higher equity value than FCF to firm?
Only factor to be accounted in the FCF to equity is interest, discount factor and debt repayment.
If both gives same equity value, and since both begin with EBIT, it means interest payment and\or discounting factor is tremendeous to be able to be similar value to market value of debt in FCF to firm.
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