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vogel (6/14)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › vogel (6/14)

  • This topic has 1 reply, 2 voices, and was last updated 1 year ago by John Moffat.
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  • March 2, 2024 at 9:34 am #701653
    zaynnnn
    Participant
    • Topics: 29
    • Replies: 14
    • ☆

    why the interest is ignored in calculating the free cash flow?

    March 2, 2024 at 4:15 pm #701707
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54761
    • ☆☆☆☆☆

    Because it is the free cash flow available for all investors (equity and debt). The cost of debt is taken into account in the WACC that is used to discount the flows.
    (The interest is taken into account when we are required to calculate the free cash flow to equity, and that is discounted just at the cost of equity.)

    I do explain this in my free lectures.

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