Enterprise & Equity Value
Why does a DCF using unlevered free cash flow give you enterprise value, while one using levered free cash flow gives you equity value?
Model answer
Unlevered FCF (free cash flow to the firm) is cash before any debt service - it's available to all capital providers - so discounting it at WACC (the blended cost of all capital) yields the value of…
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More from Enterprise & Equity Value
- What's the difference between enterprise value and equity value?
- Why do you subtract cash when going from equity value to enterprise value?
- Why is enterprise value capital-structure neutral but equity value is not?
- A company issues $100 of new debt and holds the cash on its balance sheet. What happens to EV and equity value?
- Which valuation multiples pair with enterprise value vs. equity value, and why?
- How do you calculate fully diluted shares?
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