Value of Entity

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July 20, 2017 at 2:58 pm #397795
cys94
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Dear John,

By using the free cash flow to firm or free cash flow to equity model, we are actually computing the value of equity or entity of the company? Is it that the value of entity equals to the value of equity + value of debt?
July 21, 2017 at 7:25 am #397876
John Moffat
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Discounting free cash flows at the WACC gives the value of the company (equity plus debt).
Discounting free cash flows to equity at the cost of equity gives the value of the equity.
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