Generalized Free Cash Flow for the Firm (FCFF) Excel Model
Originally published: 21/06/2016 17:59
Last version published: 02/02/2018 14:49
Publication number: ELQ-15242-3
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Generalized Free Cash Flow for the Firm (FCFF) Excel Model

Compute the FCFF (Free Cash Flow for the Firm) Model for a Firm with this excel spreadsheet model.

A generalised FCFF (Free Cash Flow for the Firm) Excel model, where the operating margins are allowed to change each year; best suited for firms in transition.

Inputs needed:
1. Length of high growth period
2. Expected growth rate in earnings during the high growth period.
3. Capital Spending, Depreciation and Working Capital needs during the high growth period.
4. Expected growth rate in earnings during the stable growth period.
5. Inputs for the cost of capital. (Cost of equity, Cost of debt, Weights on debt and equity)

- Prof. Aswath Damodaran

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This Best Practice includes
1 Excel Model File

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Further information

The objective of this model is to get the following output values:
- Present Value of FCFF in high growth phase
- Present Value of Terminal Value of Firm
- Value of the firm
- Market Value of Debt
- Market Value of Equity
- Value of Options Outstanding (See option worksheet)
- Value of Equity in Common Stock
- Value of Equity per Share

Best suited for firms in transition

1. The firm is expected to grow at a higher growth rate in the first period.
2. The growth rate will drop at the end of the first period to the stable growth rate.
3. The free cashflow to equity is the correct measure of expected cashflows to stockholders.


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