FCFE for dividend capacity vs. business valuation

This topic has 3 replies, 2 voices, and was last updated 4 years ago by John Moffat.

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June 10, 2021 at 2:05 am #624332
ivanovrita86
Participant
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Dear John,
Is there any difference in calculation of Free Cash Flow to Equity in order to calculate the dividend capacity vs. in order to calculate the business value? I am confused…
Thank you so much!
Best regards,
Margarita
June 10, 2021 at 7:52 am #624378
John Moffat
Keymaster
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Discounting the free cash flow to equity at the cost of equity gives the market value of the equity.
Discounting the free cash flows to the firm at the WACC gives the market value of the business (equity + debt).
June 10, 2021 at 5:53 pm #624499
ivanovrita86
Participant
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Thank you so much, John!
Margarita
June 11, 2021 at 8:39 am #624615
John Moffat
Keymaster
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You are welcome 🙂
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