Corporate Finance: Instructor\'s Manual Applied Corporate Finance

Aswath Damodaran 499

! Application Test: Estimating your firm’s FCFF

! Estimate the FCFF for your firm in its most recent financial year:

In general, If using statement of cash flows

EBIT ( 1 - t) EBIT ( 1 - t)

+ Depreciation + Depreciation

• Capital Expenditures + Capital Expenditures


• Change in Non-cash WC + Change in Non-cash WC
  = FCFF = FCFF
  Estimate the dollar reinvestment at your firm:
  Reinvestment = EBIT ( 1 - t) - FCFF

Again, include acquisitions as part of cap ex.