• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
Free ACCA & CIMA online courses from OpenTuition

Free ACCA & CIMA online courses from OpenTuition

Free Notes, Lectures, Tests and Forums for ACCA and CIMA exams

  • ACCA
  • CIMA
  • FIA
  • OBU
  • Books
  • Forums
  • Ask AI
  • Search
  • Register
  • Login
  • ACCA Forums
  • Ask ACCA Tutor
  • CIMA Forums
  • Ask CIMA Tutor
  • FIA
  • OBU
  • Buy/Sell Books
  • All Forums
  • Latest Topics

20% off ACCA & CIMA Books

OpenTuition recommends the new interactive BPP books for March and June 2025 exams.
Get your discount code >>

Free cash flow

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Free cash flow

  • This topic has 1 reply, 2 voices, and was last updated 4 years ago by John Moffat.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • June 6, 2020 at 7:09 pm #573002
    yellow
    Participant
    • Topics: 53
    • Replies: 68
    • ☆☆

    Dear Moffat,
    Thank you for your lectures.
    I am a little confused about FCFF.
    I accept the fact that the value of the firm is the PV of free cash flow discounted at WACC. but my question is why we use cash flow BEFORE interest and tax? Why not use cash flow after tax and interest? Both tax and interest are cash outflow! In this case there is no difference between a highly geared and ungeared company! why?! Is there any concept behind that? Does it relate to M&M theory!!?? Sorry, I am really confused …

    Thank you

    June 7, 2020 at 10:13 am #573027
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54659
    • ☆☆☆☆☆

    It is the same reason that we ignore interest in the normal calculation of NPV of a project.

    The calculation of the WACC takes into account the interest on debt (and the tax saving on the interest) and so to include it in the cash flows as well would be double counting.

  • Author
    Posts
Viewing 2 posts - 1 through 2 (of 2 total)
  • You must be logged in to reply to this topic.
Log In

Primary Sidebar

Donate
If you have benefited from our materials, please donate

ACCA News:

ACCA My Exam Performance for non-variant

Applied Skills exams is available NOW

ACCA Options:  “Read the Mind of the Marker” articles

Subscribe to ACCA’s Student Accountant Direct

ACCA CBE 2025 Exams

How was your exam, and what was the exam result?

BT CBE exam was.. | MA CBE exam was..
FA CBE exam was.. | LW CBE exam was..

Donate

If you have benefited from OpenTuition please donate.

PQ Magazine

Latest Comments

  • Nicholas1239798 on IASB Conceptual Framework – Introduction – ACCA Financial Reporting (FR)
  • Starmoon123 on Strategy formulation (Part 2) – ACCA (AFM) lectures
  • nosiphoceliwedlamini@gmail.com on Revenue – Example 5 (profitable contracts) – ACCA Financial Reporting (FR)
  • amaanalli on Fraud, bribery, whistle-blowing and company ethics – ACCA Strategic Business Leader (SBL)
  • verweijlisa on Group SPL – Group profit on disposal – ACCA Financial Reporting (FR)

Copyright © 2025 · Support · Contact · Advertising · OpenLicense · About · Sitemap · Comments · Log in