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Is interest payment a relevant cash flow item, if no, kindly explain why. Thank u.
No, we do not include interest payments in free cashflow to firm neither in investment appraisal, because the discount factor used in the latter includes this cost already. And in FCF we don’t include it because we want to calculate the cashflow that is available to the company rather than equity holders.but we do include it in Free cashflow to equity.
My 2 cents, although John here will correct me if I’m wrong.
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