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Business valuation

2.5 The free cash flow TO EQUITY (FCFE) method – overview

Value of the EQUITY = forecast FCFE,
discounted at the cost of equity

Where FCFE is found by forecasting FCF as above and then
adjusting it by:

 deducting debt interest paid,

 deducting any debt repayments,

 adding any cash raised from debt issues.

Illustrations and further practice

Now try TYU 2 in Chapter 13

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