Free Cash Flow to Equity

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Free Cash Flow to Equity

The cash that a company has on hand after all debt service and expenses have been paid and reinvestment has been made. The free cash flow to equity is calculated thusly:

FCFE = Net income + newly borrowed debt - capital expenditures - change in net working capital - debt service.

FCFE is a measure of a company's value and is considered an alternative to the dividend discount model.

References in periodicals archive ?

Equity-based, single-factor multiples Value drivers Earnings Assets Dividends Cash flow MPV P PBT BVE OD NCIfOA PAT NCIfIA HE FCFE Notes: MPV--market price variable; P--market price; PBT--profit before tax; PAT--Profit after tax; HE--headline earnings; BVE--book value of equity; OD--ordinary dividends; NCIfOA--net cash inflow from operating activities; NCIfIA--net cash inflow from investment activities; FCFE--free cash flow to equity.

The valuation performance of mathematically-optimised, equity-based composite multiples

There is an added technical reason for using OCF as opposed to FCFE. When a merger is accounted for using the purchase method (as opposed to the pooling method), the merged bank's EQUITY will include the goodwill recorded for the transaction, while the merging banks EQUITY will not.

Efficiency and market power gains in bank megamergers: evidence from value line forecasts

[P.sup.pT] (PROFIT) also has a value higher than FCFE; PROFIT is positive in 155 cases out of 250, while FCFE is positive only in 90 cases out of 250.

Comparative applications of income and financial analysis for tomato processing firms in Italy

On our estimates, starting from 2013 Transneft should be able to generate significant FCFE, enabling it to potentially pay higher dividends.

ATON - Transneft - How Generous is the Russian Government - Aug 22, 2012

Os resultados encontrados pelos metodos FCFF, APV e FCFE e pelo modelo RI, assim como o valor ajustado a 100% do capital proprio, estao mostrados na Tabela 2 e na Figura 1.

A comparative study of discounted cash flow and residual income models for business valuation: case study of a power energy company/Comparacao dos modelos de avaliacao de empresas com base no fluxo de caixa descontado e no lucro residual: estudo de caso de uma empresa de energia eletrica

(2) The expected growth in FCFE will include growth in income from operating assets and not growth in income from increases in marketable securities.

2 Discounted cash flow valuation

A FCFE model is simply a dividend discount model where the dividend is replaced by FCFE per share:

Chapter 35 Security valuation

The results for the ranked current-year cash flows to shareholder specifications indicate that ranked current-year dividends per share (DPS) was more useful than either the ranked current-year dividend payout ratio (DPR) or ranked current-year free cash flows to equity (FCFE).

Predicting relative stock prices: an empirical study

The FCFE is a nonprofit charitable organization based in Phoenix, Arizona.

Self-Reliance Sage

Free cash flow to equity (FCFE) represents post-tax cash flows that are available to be distributed to all the equity fund providers of an entity, net of capital requirements to grow or maintain the business.

An emerging market perspective on key value drivers in the valuation of cross-border transactions into South Africa

Currently, taking into consideration the solutions used in practice, the most popular methods are those that assess free cash flows, such as Free Cash Flow to Firm (FCFF) and Free Cash Flow to Equity (FCFE).

Equity shares equating the results of FCFF and FCFE methods

Free Cash Flow to Equity (FCFE)###561,853###598,107###755,827###816,037###(253,110)###1,643,667###1,816,587###2,018,046###2,243,610###2,685,039