PVFCFF = FCFF1 / (1 + WACC)^1 + FCFF2 / (1 + WACC)^2 + ... + FCFFn / (1 + WACC)^n
If a firm has non-operating assets (e.g., land held for investment) on its balance sheet, the value of these assets must be added to the value of the operating assets (determined using the present value of the FCFFs and terminal value) to find the total firm value.
Total firm value
= value of operating assets + value of non-operating assets
= PVFCFF + value of non-operating assets
Thursday, May 6, 2010
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