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free cash flow to firm (FCF) & free cash flow to equity (FCFE)
when we calculate the FCFE and deduct the interest, shouLd we deduct net of tax interest or full interest)?
eg. the FCF is 100, interest expenses 30, tax rate 30%
in order to get FCFE, we should use 100-30 or 100-21 ?You deduct the interest and the tax – we want the cash flow available for the shareholders, which is after both interest and tax.
do we need to separate the interest payment and the tax shield on interest payment?
for eg, FCF after tax is 100, interest payment is 30, tax rate is 30%, what is the FCFE?
100-21?
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