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Pairing Discount Rate with Cash Flows

December 14, 2015

Firm Value = FCFF discounted at WACC

Equity Value = FCFE discounted at Re

  • Use FCFE when capital structure is not volatile
  • Use FCFF when debt is high, negative FCFE
  • Equity Value = firm value – MV of debt
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  1. Another CFA® Exam is Finished – Muskblog

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