Write out the model based upon free cash flow (FCF) that is used when valuing an...

Write out the model based upon free cash flow (FCF) that is used when valuing an entire firm that does not pay a dividend.

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Expert Solution

Those companies who are not paying out with any kind of Dividend and are often valued with the free cash flows which are available to the organisation.

Free cash flows of the companies can be calculated by=(net income + non cash expense- increase in working capital- capital expenditure)

Hence, we will be not taking into account any kind of capital expenditure which has been done by the company and we will also not take into account any kind of increase in the working capital of the company.

This can be used for the valuation of such businesses which does not generally any kind of dividend and they will be valued according to the free cash flows generated by these companies. This can even be applied for those companies who are not making profits.

jeff jeffy answered 2 years ago

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