Publication number: ELQ-32847-1
View all versions & Certificate
FCFE (Free Cash Flow to Equity) Valuation Model
A complete FCFE valuation model that allows you to capital R&D and deal with options in the context of a valuation model
Prof. Aswath Damodaran offers you this Best Practice for free!
download for free
Add to bookmarks
Further information
The objective of this model is to get the following output values for a firm:
- Present Value of FCFEs in high growth phase
- Present Value of Terminal Equity Value
- Value of equity in operating assets
- Value of cash and marketable securities
- Value of equity in firm
- Value per share
How it works:
The expected dividends are estimated for the high growth period, using the payout
ratio for the high growth period and the expected growth rate in earnings per share.
The expected growth rate is estimated either using fundamentals:
Expected growth = Retention Ratio * Return on Equity
Alternatively, you can input the expected growth rate.
At the end of the high growth phase, the expected terminal price is estimated using
dividends per share one year after the high growth period, using the growth rate
in stable growth, the payout ratio in stable growth and the cost of equity in stable
growth.
The dividends per share and the terminal price are discounted back to the present at
the cost of equity changes.
If your cost of equity in stable growth is different from your cost of equity in high
growth, the cost of equity in the second half of the stable growth period will be
adjusted gradually from the high growth cost of equity to a stable growth cost of
equity.
INPUTS NEEDED:
1. Length of high growth period
2. Expected growth rate in earnings during the high growth period.
3. Dividend payout ratio during the high growth period.
4. Expected growth rate in earnings during the stable growth period.
5. Expected payout ratio during the stable growth period.
6. Current Earnings per share
7. Inputs for the Cost of Equity
Reviews
4.7 / 5 (27 votes)- 78%
- 19%
- 4%
- -
- -
Write a review
- FCFENicely built
People using this Best Practice also downloaded
Three-Stage Free Cash Flow to Equity (FCFE) Discount Model
Value the equity in a firm with three stages of growth1,849Discussadd_shopping_cartfreeby Aswath Damodaran
Free Cash Flow to Equity (FCFE) Stable Growth Model
Value the equity in a stable firm on the basis of free cashflows to equity591Discussadd_shopping_cartfreeGordon Growth Excel Model
An Excel Valuation Model to value the equity in a stable firm paying dividends, with stable growth664Discussadd_shopping_cartfreeTwo-Stage Free Cash Flow to Equity (FCFE) Discount Model
Value the equity in a firm with two stages of growth3,206Discussadd_shopping_cartfreeAbercrombie & Fitch Valuation Model
A full PDF of an Excel Valuation Model created for fundamental analysis of Abercrombie & Fitch ($ANF) in 2006949Discussadd_shopping_cartfreeby Lindsay Meyer
Bank Valuation Excel Model Template
This Excel model contains a template for calculating the value of a bank.1,9412add_shopping_cart$49.00by Mahender K. Punhani
Dealing with Employee Options
Learn how to value employee options and inserting this share in the value of your equity per share.945Discussadd_shopping_cartfreeValuation Partial Commitment of the Entrepreneur
Learn how to value an entrepreneur's partial commitment to a venture6032add_shopping_cartfreeby Richard L. Smith
Dividend Adjusted Model to value Short Term Options
A dividend-adjusted model for valuing short-term options.562Discussadd_shopping_cartfreeValue of Control in a Firm - Excel Model
This Excel model analyzes the value of control in a firm.1,457Discussadd_shopping_cartfree
More Best Practices from Prof. Aswath Damodaran
Value of Control in a Firm - Excel Model
This Excel model analyzes the value of control in a firm.1,457Discussadd_shopping_cartfreeMerger Synergy Valuation Excel Model
This Excel Model estimates the value of synergy in a merger.2,815Discussadd_shopping_cartfreeMerger & LBO Model Valuation Excel
This LBO model in excel analyzes the value of equity and the firm in a leveraged buyout operation.9,861Discussadd_shopping_cartfreeFree Cash Flow for the Firm (FCFF) Valuation Excel Model
An Excel Model to value firms with operating income that is either positive or can be normalized to be positive.1,734Discussadd_shopping_cartfreeDiscounted Cash Flow (DCF) Excel Model
This DCF Excel Model provides a rough guide to which discounted cash flow model may be best suited to your firm.1,7641add_shopping_cartfreeDividend Discount Model
A complete dividend discount model that can do stable growth, 2-stage or 3-stage valuation.3,346Discussadd_shopping_cartfreeFCFF (Free Cash Flow for the Firm) Excel Model with exposure to country risk
An Excel FCFF Model allowing the user to enter a measure of company exposure to country risk when making a valuation664Discussadd_shopping_cartfreeHigh Growth Firms Valuation Model
Value tough-to-value firms, with negative earnings, high growth in revenues and few comparables548Discussadd_shopping_cartfreeSimple FCFF Model (Free Cash Flow for the Firm)
A complete FCFF model that allows for changing margins and has default assumptions built in450Discussadd_shopping_cartfreeValuation of Premiums
A model to value the premium you should pay for growth in either an intrinsic valuation or a relative valuation.207Discussadd_shopping_cartfreeBlack-Scholes converted for Binomial Tree
Converts the standard deviation input in the Black-Scholes model to up and down movements in the binomial tree.2,941Discussadd_shopping_cartfreeDividend Adjusted Model to value Long Term Options
A dividend-adjusted model for valuing long term options.330Discussadd_shopping_cartfree
Any questions on FCFE (Free Cash Flow To Equity) Valuation Model?
The user community and author are here to help. Go ahead!
