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READING 30: FREE CASH FLOW VALUATION
net borrowing = MODULE 30.4: EXAMPLE
(long- & short-term new debt issues) − (long- & short-term debt repayments) =
(114 + 20) − (100 + 10) = 24
EXAMPLE: Calculating FCFF and FCFE using the statement of
cash flows: In order to see how all these formulas fit together,
reconstruct the framework from Figure 30.2 using the actual numbers
from the previous example.
EXAMPLE: Calculating FCFF and FCFE with the other
formulas. Calculate FCFF starting with EBIT, EBITDA, and CFO,
and calculate FCFE starting with NI and CFO.
An analyst may also be concerned about the uses of cash flow. Typically, this is done to verify the FCFF calculation, as FCFF sources must
always equal FCFF uses, and FCFE sources must always equal FCFE uses.
