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Posts Tagged ‘cost of equity’

What Is Free Cash Flow to the Firm?

Free cash flow to the firm (FCFF) is the cash flow that a company is ‘free’ to distribute to all providers of money (both, debt and equity) without damaging its growth opportunities. Below I explain the process an analyst would go through to estimate free cash flow. Like all forecasts, your FCFF starts with your…

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WACC – Theory versus Reality

Since debt is cheaper than equity, in theory, this would mean that a company would prefer to be fully funded by debt to minimize its cost of capital. However, it’s not the case in reality that a company has a capital structure that is 100% debt. In this post, our main focus is on the…

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Mistake #8: Choosing an Unreasonable Cost of Equity

I’ve narrowed down all the mistakes I’ve seen in my career over the last 25 years as an analyst, as a head of research, and in the Valuation Master Class, into these top nine. Check out the previous posts in the series here. Overly optimistic revenue forecasts Underestimating expenses causing unrealistic profit forecasts Growing fixed…

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