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Sir a couple of days ago I asked you why in Milma Co.(june 2013), the potential MV/share price was calculated using FCF to firm when FCF to equity should have been used. And you said that since the bonds are going to repaid and no new bonds will be issued in place, we take FCF to firm which is essentially same as FCF to equity.
I understood your point, and accepted my mistake. However, as i referred to my study text again today, I realised that FCF to equity is found out by deducting any interest paid, ANY DEBT REPAYMENTS(the point in question with as far as Milma Co. is concerned) and adding any debt proceeds received.
Given the aforementioned point, now I again feel that we should have deducted the MV of both debts, as we are going to repay them soon!
The market value is the PV of the future cash flow. If there were to be repayments of debt in future years then they would be relevant,
However here we are are looking at the future cash flows on the basis that the debt is repaid immediately if the proposal goes ahead.
sir my doubt is amply clear now! just so happy to finally get it through and through!! thank you so much!
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