In this article, I will explain the pros and cons of the discounted cash flow (DCF) valuation model. The DCF model is a valuation method that estimates the value of an investment based on its expected future cash flows, discounted back to their present value using an appropriate discount rate. This method is a popular […]
In this article, I will explain the difference between enterprise value and equity value. Equity value shows how much a company's shares are worth on the market. Enterprise value goes a step further by adding in the company's debt and subtracting its cash. The main difference is that equity value looks at what's available to […]
In this article, I will show you how to forecast free cash flow to the firm (FCFF), also known as unlevered free cash flow (UFCF). FCFF is the cash a company generates for all its capital providers, before considering interest payments. Typically, investors forecast FCFF to assess the attractiveness of an investment and to value […]
In this article, I will show you how to calculate and interpret free cash flow to the firm (FCFF), also known as unlevered free cash flow (UFCF). Understanding FCFF is essential for investors as it provides insight into a company's financial health, revealing the cash available to debt holders, preferred, and common stockholders after covering […]
In this article, I will show you how to normalize free cash flow to the firm (FCFF), also known as unlevered free cash flow (UFCF). FCFF is the cash available to all capital providers in a company, including common stockholders, preferred stockholders, and debt lenders. Normalizing FCFF is necessary to smooth out irregular items and […]
In this article, I will show you how to calculate and interpret free cash flow to equity (FCFE), also known as levered free cash flow (LFCF). Understanding FCFE is essential for investors as it provides insight into a company's financial health, revealing the cash available to equity shareholders after fulfilling all operating expenses, non-cash expenses […]
In this article, I will show you how to perform scenario and sensitivity analyses for effective stock valuation. Scenario analysis evaluates stock valuation under different future conditions by changing key factors such as growth rates, demonstrating how conservative, base, and optimistic growth scenarios can affect valuations. Meanwhile, sensitivity analysis examines the impact of changes in […]
In this article, I will show you how to calculate and interpret the cost of preferred stock for a company. Preferred stock serves as a hybrid financing option for companies, combining features of both debt and equity. As a hybrid security, it offers regular dividends and holds a higher priority than common stock, yet ranks […]
In this article, I will show you how to calculate and interpret the cost of debt for a company. The cost of debt is a fundamental concept in corporate finance, affecting a company's capital structure and financial health by representing the effective interest rate on its debt obligations. Additionally, it serves as a key component […]