why the interest is ignored in calculating the free cash flow?
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vogel (6/14)
2y ago#1Because 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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