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Incorrectly estimating future growth in cash flow-Chosen base year is not a representative year
Operating Cash Flow - Fixed Capital Investment+ Net Borrowing
Free Cash Flow to Firm- Interest Expense * (1 - Tax Rate)+ Net Borrowing
-Amortization of intangibles-Restructuring charges and other noncash
losses-Gains or losses on the sale of long-term assets-Amoritization of
bond discount & accretion of bond premium-Deferred taxes
None
EBIT * (1 - Tax Rate)+ Depreciation- Fixed Capital Investment- Addition to Working Capital
Net Income+ Noncash Charges- Fixed Capital Investment- Addition to Working Capital+ Net Borrowing
Cash flow generated by firm's operations in excess of capital required to sustain the firm's current productive capacity
None
Cash available to stockholders after funding capital requirements and expenses associated with debt financing
Net Income+ Noncash Charges+ Interest Expense * (1 - Tax Rate)- Fixed Capital Investment- Addition to Working Capital
None
-Use historical free cash flow and assume a growth rate-Use components
of free cash flow, estimate each one separately and assume a target
debt-to-asset ratio
EBITDA * (1 - Tax Rate)+ Depreciation * Tax Rate- Fixed Capital Investment- Addition to Working Capital
Operating Cash Flow + Interest Expense * (1 - Tax Rate)- Fixed Capital Investment
Capital Expenditures - Proceeds from Sale of Long-Term Assets
-Add dividends back to free cash flow-Change WACC to take into account preferred dividends-Reflect in net borrowing
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