Free Cash Flow for the Firm (FCFF) Stable Growth Model

Value a stable firm on the basis of free cashflows to firm.

fcfffinancefree cash flow for the firmstable growth modelvaluation

Description
Stable growth FCFF discount model

User defined inputs
The user has to define the following inputs to the model:
1. Current EBIT and tax rate
2. Capital Spending and Depreciation
3. Change in working capital
4. Debt ratio
5. Cost of Equity or Inputs to the CAPM (Beta, Riskfree rate, Risk Premium) and Cost of Debt
6. Expected Growth Rate in free cashflows to firm forever.

Note: this model is being shared with the authorization of Professor Aswath Damodaran from NYU Stern Business School (www.damodaran.com)

This business tool includes
1 Excel Model File

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Further information


Outputs:
EBIT (1- tax rate)
- (Capital Spending - Depreciation)
- Change in Working Capital
Free Cashflow to Firm

Cost of Equity
Cost of Debt
Cost of Capital
Expected Growth rate

Value of Firm

Best suited for firms growing at the same rate as the economy

Assumptions in the model:
1. The firm is in steady state and will grow at a stable rate forever.
2. The firm's leverage is known and constant.

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