Model Of Free Cash Flow

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Free cash flow measures a company’s financial health. This is determined by calculating operating cash flow minus capital expenditures. This only represents the cash that a firm is able to make after spending all required monies needed to keep or expand an asset base. Also known as a non-GAPP financial measure. Earnings before interest, tax, depreciation, and amortization or EBITJDA is minus net cash interest expense, non-discretionary cash capital expenditures and cash taxes paid.

The dividend discount model could have used to be employed to show a company’s value or valuation. This model could be used only if a company pays any dividends. This is the end result that is left over from a firm’s expenses, debt, reinvestment, and any other
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By using another formula Equity FCF = Firm FCF –(Interest expense – Interest Tax Savings + Principal payments – New Debt Issue Proceeds), we can see that FCF is directly involved in calculating EFCF’s value.

There is a way to indirectly calculate a firm’s free cash flow by focusing on how the business cash gets to the appropriate investors, and creditors. This could also gain insight on to how a company represents its FCF.

By using the wrong measure for dividend returns, a firm could be not giving enough back to the shareholders, or too much money back resulting in financial dishonesty. Since EFCF is only for the stakeholders, and FCF is the amount of free cash that is available to all the parts of the firm itself the right reporting tools need to be used. The FCF can be a basis to judge the whole companies financial success, while the EFCF is for the shareholders to gauge how well their investment into the firm is doing.

2. (15 Points) Compare and contrast the three tools used to deal with uncertainty in discounted cash flow analysis: scenario analysis, break-even analysis, and
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There are some benefits of using project specific WACC since everything is upfront, the places where the financing comes from are laid out, and can be regulated. The exact amount of debt that is involved within a particular investment is directly fixed on to the company’s total balance sheet. This is not enough to tally the amount of total investment debt, or equity financing since the only way to determine these weights is to have the market’s value on

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