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Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › free cash flows
Why interest is not deducted in calculating FCFs?
Free cash flow is the cash available to finance all borrowings (exactly as when we calculate the net cash flows for projects in Paper F9).
We then discount at the WACC, and discounting at the WACC is accounting for the interest (because the cost of debt is part of the WACC). To include interest in the cash flows would be accounting for the interest twice.
