Free Cash Flow for the Firm (FCFF) Stable Growth Model
Value a stable firm on the basis of free cashflows to firm.
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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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