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FCF to the Firm(FCFF) Models

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5 Calculating FCFF from Net Income change in noncash working capital e.g., depreciation expenses a.k.a., capex 5... The model assumes that 1 FCFF grows at a constant rate g forever,

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FCF to the Firm(FCFF) Models

Valuation: 중앙대학교 경영학부 박창헌 교수

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FCFF Approach to Valuation

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FCFE Approach to Valuation

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Free Cash Flow to the Firm (FCFF): Concept

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Source: Damodaran (p.380)

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Free Cash Flow to the Firm (FCFF): Concept

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Source: Damodaran (p.381)

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Calculating FCFF from Net Income

(change in noncash working capital)

(e.g., depreciation expenses)

(a.k.a., capex)

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Calculating FCFF : Noncash Charges

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Calculating FCFF: Fixed Capital Investment

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Calculating FCFF: Fixed Capital Investment

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Calculating FCFF: Fixed Capital Investment

Or, FCInv = ending net PP&E – beginning net PP&E + depreciation = $3,500 - $2,950 + $300 = $850

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Calculating FCFF: Fixed Capital Investment

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Calculating FCFF: Fixed Capital Investment

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Calculating FCFF: Working Capital Investment

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Calculating FCFF: Interest Expense

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Calculating FCFF Using the S/CF

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Calculating FCFF Using the S/CF

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Calculating FCFF from EBIT

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Calculating FCFF from EBIT

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Calculating FCFF from EBITDA

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Calculating FCFF from CFO

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Calculating FCFF and FCFE (recap)

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Calculating FCFF and FCFE: Example

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Calculating FCFF and FCFE: Example

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Calculating FCFF and FCFE: Example

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Calculating FCFF and FCFE: Example

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Calculating FCFF and FCFE: Example

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Calculating FCFF and FCFE: Example

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Calculating FCFF and FCFE: Example

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Calculating FCFF and FCFE: Example

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Free Cash Flows :Uses and Sources

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EBITDA Is a Poor Proxy for FCFF

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FCFF : Comparison to Other Measures

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Source: Damodaran (p.382)

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Estimating Growth in FCFF

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Source: Damodaran (p.382)

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Firms The FCFF Model Best Suited for

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Source: Damodaran (p.386)

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Problems with the FCFF Model

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Source: Damodaran (p.387)

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Single-Stage FCFF Model

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The single-stage FCFF model is useful for stable firms in mature

industries The model assumes that

(1) FCFF grows at a constant rate (g) forever, and

(2) the growth rate is less than the weighted average cost of

capital (WACC)

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Single-Stage FCFF Model

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Single-Stage FCFF Model

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Example (1): Single-Stage FCFF Model

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Example (1): Single-Stage FCFF Model

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Example (2): Single-Stage FCFF Model

Source: Damodaran (pp 384-385)

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Example (2): Single-Stage FCFF Model

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Example (2): Single-Stage FCFF Model

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Example (2): Single-Stage FCFF Model

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Two-Stage FCFF Model

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Example: Two-stage FCFF model

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Example: Two-stage FCFF model

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Example: Two-stage FCFF model

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Example: Two-stage FCFF model

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Example: Two-stage FCFF model

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Dealing with Operating Leases

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Source: Damodaran (pp 387-389)

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Dealing with Operating Leases

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Dealing with Operating Leases

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Dealing with Operating Leases

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Dealing with Operating Leases

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Dealing with Operating Leases

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Three-Stage FCFF: Dealing with R&D Capitalization

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Source: Damodaran (pp 390-391)

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Three-Stage FCFF: Dealing with R&D Capitalization

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Three-Stage FCFF: Dealing with R&D Capitalization

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Three-Stage FCFF: Dealing with R&D Capitalization

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Three-Stage FCFF Model: Samsung Electronic

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Source: 이채원

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Three-Stage FCFF Model: Samsung Electronic

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Will Equity Value Be the Same under Firm and Equity Valuation?

Source: Damodaran (pp 396-397)

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Will Equity Value Be the Same under Firm and Equity Valuation?

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Will Equity Value Be the Same under Firm and Equity Valuation?

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Will Equity Value Be the Same under Firm and Equity Valuation?

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Conclusion

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Source: Damodaran (p 419)

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