An Overview of Free Cash Flow Valuation

• Interpret Free Cash Flow to the Firm (FCFF) and Free Cash Flow to Equity (FCFE)
• Compare and Contrast the FCFF and FCFE Approaches to Valuation

Calculation of Free Cash Flow

• Appropriate Adjustments to Net Income
• Calculating FCPF from Net Income
• Calculating FCFF and FCFE Using the Statement of Cash Flow
• Calculating FCFF from EBIT
• Calculating FCFF from EBITDA
• Calculating FCFF from CFO
• Calculating FCFE from FCFF
• Calculating FCFE from Net Income
• Calculating FCFE from CFO
• Free Cash Flow With Preferred Stock

Discounted Cash Flow Analysis Steps

• Understanding and Determining Key Performance Drivers
• Project Free Cash Flow
• Calculating Weighted Average Cost of Capital
• Estimating Cost of Debt
• Estimating Cost of Equity
• Determining Terminal Value
• Using Exit Multiple Method
• Using Perpetuity Growth Method
• Calculating Present Value and Determining Valuation

Important Issues of Valuation

• The Use of Net Income and EBITDA as Proxies for Cash Flow in Valuation
• Single-Stage FCFF Model
• Single-Stage FCFE Model
• Multistage Models
• Model Assumptions and Firm Characteristics
• Three-Stage Models
• Calculating the Value of a Company Using the Stable - Growth, Two-Stage, and Three-Stage FCFF and FCFE Models
• Sensitivity Analysis in FCFF and FCFE Valuations

Free Cash Flow and Accounting Rules

• Financial Statements Prepared According to International Financial Reporting Standards (IFRS)
• Financial Statements Prepared According to Generally accepted Accounting Principles (GAAP)

Other Approaches to Forecasting Free Cash Flow

• Historical Free Cash Flow
• Underlying Components of Free Cash Flow
• The Effect of Dividends, Share Repurchases, Share Issuance