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Ask the Tutor ACCA AFM

Equity valuation by free cash flow to the equity

Rruchikapg5y ago
When we use free cash flow to the equity, we should discount by cost of equity (Ke). Is that Ke, Keg(Geared) or Keu (Ungeared ) ?
John MoffatJohn MoffatTutor5y ago#1
We always discount the free cash flow to equity by the actual cost of equity (which, if the company has gearing, if the geared cost of equity).
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