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Selorne’s FCFE Multiplier

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › Selorne’s FCFE Multiplier

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.
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    Posts
  • October 24, 2021 at 8:46 am #638962
    Kira0896
    Member
    • Topics: 5
    • Replies: 1
    • ☆

    Good evening, Sir.

    I notice there is FCFE multiplier in Selorne. Could Sir kindly explain the purpose of this multiplier as I do not understand its concept.

    I would appreciate it if Sir is willing to allocate your time on explaining this question.

    Thanks and stay safe.

    October 24, 2021 at 2:44 pm #638992
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51538
    • ☆☆☆☆☆

    You will have to be specific as to which multiplier you are referring to.

    For Chawon we are using the growth formula from the formula sheet because we are discounting a growing perpetuity.

    For the total company valuation we are multiplying by 8 because the question specifically states that the share value is a multiple of 8 of the free cash flows (and so is effectively a PE valuation).

    I do explain both of these approaches in my free lectures.

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