{"id":18199,"date":"2021-07-21T02:08:17","date_gmt":"2021-07-21T02:08:17","guid":{"rendered":"https:\/\/analystprep.com\/study-notes\/?p=18199"},"modified":"2026-02-25T17:21:58","modified_gmt":"2026-02-25T17:21:58","slug":"calculating-fcff-and-fcfe","status":"publish","type":"post","link":"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/calculating-fcff-and-fcfe\/","title":{"rendered":"Calculating FCFF and FCFE"},"content":{"rendered":"<script type=\"application\/ld+json\">\r\n{\r\n  \"@context\": \"https:\/\/schema.org\",\r\n  \"@type\": \"VideoObject\",\r\n  \"name\": \"Free Cash Flow Valuation (2025 Level II CFA\u00ae Exam \u2013 Equity \u2013 Module 3)\",\r\n  \"description\": \"CFA Level II Equity lesson on Free Cash Flow Valuation covering FCFF vs FCFE, ownership perspective in FCFE, adjustments to calculate FCFF\/FCFE from net income, EBIT, EBITDA, and CFO, forecasting approaches, multi-stage valuation models, terminal value, sensitivity analysis, and evaluating whether a stock is overvalued or undervalued.\",\r\n  \"thumbnailUrl\": \"https:\/\/img.youtube.com\/vi\/A10ZXpSEZaM\/maxresdefault.jpg\",\r\n  \"uploadDate\": \"2021-07-22\",\r\n  \"duration\": \"PT50M22S\",\r\n  \"contentUrl\": \"https:\/\/www.youtube.com\/watch?v=A10ZXpSEZaM\",\r\n  \"embedUrl\": \"https:\/\/www.youtube.com\/embed\/A10ZXpSEZaM\"\r\n}\r\n<\/script>\r\n<script type=\"application\/ld+json\">\r\n{\r\n  \"@context\": \"https:\/\/schema.org\",\r\n  \"@type\": \"QAPage\",\r\n  \"mainEntity\": {\r\n    \"@type\": \"Question\",\r\n    \"name\": \"What is the free cash flow to the firm (FCFF) for Blue Ltd?\",\r\n    \"text\": \"Blue Ltd has debt of $200,000 and equity of $300,000. It reported net income of $275,000. During the period, the company invested $90,000 in fixed capital and $60,000 in working capital. The only non-cash expense was $40,000, and the average after-tax interest rate on debt is 8%. What is the FCFF closest to?\",\r\n    \"answerCount\": 1,\r\n    \"acceptedAnswer\": {\r\n      \"@type\": \"Answer\",\r\n      \"text\": \"The free cash flow to the firm (FCFF) is $181,000. FCFF is calculated as net income plus non-cash charges plus after-tax interest expense, minus investments in fixed capital and working capital. Using the values provided: $275,000 + $40,000 + (8% \u00d7 $200,000) \u2212 $90,000 \u2212 $60,000 = $181,000.\"\r\n    }\r\n  }\r\n}\r\n<\/script>\r\n\r\n<p><iframe loading=\"lazy\" src=\"\/\/www.youtube.com\/embed\/A10ZXpSEZaM\" width=\"611\" height=\"343\" allowfullscreen=\"allowfullscreen\"><span data-mce-type=\"bookmark\" style=\"display: inline-block; width: 0px; overflow: hidden; line-height: 0;\" class=\"mce_SELRES_start\">\ufeff<\/span><\/iframe><\/p>\r\n\r\n<p>Consider the following information regarding ABC Ltd:<\/p>\r\n<p>$$ \\textbf{Income Statement (in \\$ million)} $$<\/p>\r\n<p>$$\\small{\\begin{array}{l|r|r} &amp; \\textbf{2020} &amp; \\textbf{2019} \\\\\u00a0 \\hline\\text{Sales} &amp; 294 &amp; 212 \\\\ \\hline\\text{COGS} &amp; 132 &amp; 106 \\\\ \\hline\\text{Gross profit} &amp; 162 &amp; 106 \\\\ \\hline\\text{SG&amp;A} &amp; 12 &amp; 9 \\\\ \\hline\\text{Depreciation} &amp; 28 &amp; 24 \\\\ \\hline\\text{EBIT} &amp; 122 &amp; 73 \\\\ \\hline\\text{Interest Expense} &amp; 9 &amp; 7 \\\\ \\hline\\text{Pre-tax earnings} &amp; 113 &amp; 66 \\\\ \\hline\\text{Taxes} &amp; 28.25 &amp; 17 \\\\ \\hline\\textbf{Net income} &amp; \\bf{84.75} &amp; \\bf{50}\\\\ \\end{array}}$$<\/p>\r\n<p>$$ \\textbf{Balance Sheet (in \\$ million)} $$<\/p>\r\n<p>$$\\small{\\begin{array}{l|r|r}\u00a0 &amp; \\textbf{2020} &amp; \\textbf{2019}\u00a0 \\\\ \\hline\\text{Gross PPE} &amp; 678 &amp; 529 \\\\ \\hline\\text{Accumulated depreciation} &amp; 122 &amp; 94 \\\\ \\hline\\text{Net PPE} &amp; 556 &amp; 435 \\\\ \\hline\\text{Inventory} &amp; 25 &amp; 21 \\\\ \\hline\\text{Accounts receivable} &amp; 4 &amp; 7 \\\\ \\hline\\text{Cash} &amp; 11 &amp; 9 \\\\ \\hline\\text{Total current assets} &amp; 40 &amp; 37 \\\\ \\hline\\textbf{Total assets} &amp; \\bf{596} &amp; \\bf{472} \\\\ \\hline\\text{Common stock} &amp; 141 &amp; 141 \\\\ \\hline\\text{Retained earnings} &amp; 236 &amp; 157 \\\\ \\hline\\text{Total equity} &amp; 377 &amp; 298 \\\\ \\hline \\text{Long-term debt} &amp; 172 &amp; 136 \\\\ \\hline\\text{Short-term debt} &amp; 29 &amp; 24 \\\\ \\hline\\text{Accounts payable} &amp; 18 &amp; 14 \\\\ \\hline\\text{Total current liabilities} &amp; 47 &amp; 38 \\\\ \\hline\\text{Total liabilities} &amp; 219 &amp; 174 \\\\ \\hline\\textbf{Total equity and liabilities} &amp; \\bf{596}&amp; \\bf{472}\\\\ \\end{array}}$$<\/p>\r\n<p>We can estimate FCFF and FCFE for 2020 starting with:<\/p>\r\n<ul>\r\n\t<li>Net income.<\/li>\r\n\t<li>EBIT.<\/li>\r\n\t<li>EBITDA.<\/li>\r\n\t<li>CFO.<\/li>\r\n<\/ul>\r\n<a href=\"https:\/\/analystprep.com\/free-trial\/\"\r\n   target=\"_blank\"\r\n   rel=\"noopener noreferrer\"\r\n   style=\"display:block;margin:20px 0 28px;padding:14px 18px;border:2px solid #2563eb;border-radius:12px;text-align:center;color:#2563eb;text-decoration:none;font-weight:500;font-size:15px;background-color:#ffffff;\">\r\n   Practice FCFF and FCFE calculation questions.\r\n<\/a>\r\n<h3>Starting from Net Income<\/h3>\r\n<h4>Calculating FCFF\u00a0<\/h4>\r\n<p>$$\\begin{align*}\\text{FCFF}&amp;=\\text{NI}+\\text{NNC}+\\text{Int} (1-\\text{Tax rate})-\\text{FCInv}-\\text{WCInv}\\\\ \\\\\\text{FCInv} &amp;= \\text{Gross PPE}_{2020}\u2013 \\text{Gross PPE}_{2019}\\\\&amp;=\\$678-\\$529=\\$149\\\\ \\\\ \\text{WCInv}&amp;=(\\text{Accounts receivables}_{2020}+\\text{Inventory}_{2020}-\\text{Accounts payable}_{2020})\\\\&amp;-(\\text{Accounts receivables}_{2019}+\\text{Inventory}_{2019}-\\text{Accounts payable}_{2019})\\\\&amp;=(4+25-18)-(7+21-14)=-3\\end{align*}$$<\/p>\r\n<p>Therefore,\u00a0<\/p>\r\n<p>$$\\text{FCFF} = 84.75 + 28 + 9(1-0.25)-149-(-3) = -26.50$$<\/p>\r\n<h4>Calculating FCFE<\/h4>\r\n<p>$$\\begin{align*}\\text{FCFE}&amp;= \\text{NI} + \\text{NCC} \u2013 \\text{FCInv} \u2013 \\text{WCInv} + \\text{Net borrowing}\\\\ \\text{Net borrowing}&amp;= \\text{Short and long}-\\text{term increase in debt over the year}\\\\&amp;=(172+29)-(136+24)=41\\end{align*}$$<\/p>\r\n<p>Therefore,\u00a0<\/p>\r\n<p>$$\\text{FCFE} = 84.75+28-149-(-3)+41 = 7.75$$<\/p>\r\n<h3>Starting from EBIT<\/h3>\r\n<h4>Calculating FCFF<\/h4>\r\n<p>$$\\begin{align*}\\text{FCFF}&amp;=\\text{EBIT} (1\u2013\\text{Tax rate})+\\text{Dep}\u2013\\text{FCInv}\u2013\\text{WCInv}\\\\&amp;=122(1-0.25) +28-149-(-3) = -26.50\\end{align*}$$<\/p>\r\n<h4>Calculating FCFE<\/h4>\r\n<p>$$\\begin{align*}\\text{FCFE} &amp;= \\text{EBIT} (1-\\text{Tax rate}) \u2013 \\text{Int} (1-\\text{Tax rate}) +\\text{Dep} -\\text{WCInv} + \\text{Net borrowing}\\\\&amp; = 122 (1-0.25) \u2013 9 (1-0.25) + 28 \u2013 149 -(-3)+41 = 7.75\\end{align*}$$<\/p>\r\n<h3>Starting from EBITDA<\/h3>\r\n<h4>Calculating FCFF<\/h4>\r\n<p>$$\\begin{align*}\\text{FCFF}&amp;=\\text{EBITDA} (1 \u2013 \\text{t}) +\\text{Dep}(\\text{t})\u2013 \\text{FCInv} \u2013 \\text{WCInv}\\\\&amp;= (162-12)(1-0.25)+28(0.25)-149-(-3) =-26.50\\end{align*}$$<\/p>\r\n<h4>Calculating FCFE<\/h4>\r\n<p>$$\\begin{align*}\\text{FCFE}&amp; = \\text{EBITDA}(1-\\text{t}) \u2013 \\text{Int}(1-\\text{t}) + \\text{Dep}(\\text{t})-\\text{FCInv}-\\text{WCInv} \\\\&amp;+ \\text{Net borrowing}\\\\&amp; = (162-12)(1-0.25)-9(0.75)+28(0.25)-149-(-3)+41 = 7.75\\end{align*}$$<\/p>\r\n<h3>Starting from CFO<\/h3>\r\n<h4>Calculating FCFF<\/h4>\r\n<p>$$\\begin{align*}\\text{CFO}&amp; = \\text{Net income} +\\text{Depreciation} \u2013 \\text{WCInv}\\\\&amp;= 84.75+28&#8211;3=115.75\\end{align*}$$<\/p>\r\n<p>Therefore,\u00a0<\/p>\r\n<p>$$\\text{FCFF}=115.75+9 (1\u20130.25) \u2013149=-26.50$$<\/p>\r\n<h4>Calculating FCFE<\/h4>\r\n<p>$$\\text{FCFE} = 115.75 \u2013 149 + 41 = 7.75$$<\/p>\r\n<blockquote>\r\n<h2>Question<\/h2>\r\n<p>Blue Ltd.\u2019s capital constitutes a debt of $200,000 and equity of $300,000. It recently announced a net income of $275,000. \u00a0The company managers have invested $90,000 in fixed capital and $60,000 in working capital. The company\u2019s only non-cash expense for the period was $40,000. If the company\u2019s average after-tax interest on debt is 8%, the free cash flow to the firm (FCFF) is <em>closest<\/em> to:<\/p>\r\n<ol style=\"list-style-type: upper-alpha;\">\r\n\t<li>$90,000.<\/li>\r\n\t<li>$181,000.<\/li>\r\n\t<li>$145,000.<\/li>\r\n<\/ol>\r\n<h4>Solution<\/h4>\r\n<p><strong>The correct answer is B.<\/strong><\/p>\r\n<p>$$\\begin{align*}\\text{FCFF}&amp;=\\text{Net income}+\\text{Net non-cash charges}+\\text{Interest expense} (1-\\text{Tax rate})\\\\&amp;-\\text{Fixed capital investments}-\\text{Working capital investments}\\\\&amp;=\\$275,000+\\$40,000+(8\\%\u00d7\\$200,000)-\\$90,000-\\$60,000\\\\&amp;=\\$181,000\\end{align*}$$<\/p>\r\n<\/blockquote>\r\n<p>Reading 24: Free Cash Flow Valuation<\/p>\r\n<p><em>LOS 24 (d) Calculate FCFF and FCFE.<\/em><\/p>\r\n\r\n<div style=\"text-align:center;margin:50px 0 30px;\">\r\n  \r\n  <a href=\"https:\/\/analystprep.com\/free-trial\/\" \r\n     target=\"_blank\" \r\n     rel=\"noopener noreferrer\"\r\n     style=\"\r\n       display:inline-block;\r\n       padding:14px 34px;\r\n       background:linear-gradient(135deg,#4a74d1,#3b66c4);\r\n       color:#ffffff;\r\n       font-size:18px;\r\n       font-weight:600;\r\n       text-decoration:none;\r\n       border-radius:50px;\r\n       box-shadow:0 6px 18px rgba(59,102,196,0.25);\r\n     \">\r\n     Start Free Trial\r\n  <\/a>\r\n\r\n  <p style=\"\r\n       margin:20px auto 0;\r\n       max-width:720px;\r\n       font-size:16px;\r\n       line-height:1.6;\r\n       color:#333333;\r\n     \">\r\n     Build confidence in FCFF and FCFE valuation. Practice exam-style CFA Level II questions with detailed solutions and performance tracking.\r\n  <\/p>\r\n\r\n<\/div>","protected":false},"excerpt":{"rendered":"<p>\ufeff Consider the following information regarding ABC Ltd: $$ \\textbf{Income Statement (in \\$ million)} $$ $$\\small{\\begin{array}{l|r|r} &amp; \\textbf{2020} &amp; \\textbf{2019} \\\\\u00a0 \\hline\\text{Sales} &amp; 294 &amp; 212 \\\\ \\hline\\text{COGS} &amp; 132 &amp; 106 \\\\ \\hline\\text{Gross profit} &amp; 162 &amp; 106 \\\\&#8230;<\/p>\n","protected":false},"author":5,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[102,401],"tags":[462,216,402,459],"class_list":["post-18199","post","type-post","status-publish","format-standard","hentry","category-cfa-level-2","category-equity-valuation","tag-calculating-fcff-and-fcfe","tag-cfa-level-2","tag-equity-valuation","tag-reading-28-free-cash-flow-valuation","blog-post","no-post-thumbnail","animate"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Calculating FCFF and FCFE | CFA Level II<\/title>\n<meta name=\"description\" content=\"Learn how to calculate FCFF and FCFE using net income, EBIT, EBITDA, and cash flow from operations in equity valuation analysis.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/calculating-fcff-and-fcfe\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Calculating FCFF and FCFE | CFA Level II\" \/>\n<meta property=\"og:description\" content=\"Learn how to calculate FCFF and FCFE using net income, EBIT, EBITDA, and cash flow from operations in equity valuation analysis.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/calculating-fcff-and-fcfe\/\" \/>\n<meta property=\"og:site_name\" content=\"CFA, FRM, and Actuarial Exams Study Notes\" \/>\n<meta property=\"article:published_time\" content=\"2021-07-21T02:08:17+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2026-02-25T17:21:58+00:00\" \/>\n<meta name=\"author\" content=\"Irene R\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Irene R\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"2 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/cfa-level-2\\\/calculating-fcff-and-fcfe\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/cfa-level-2\\\/calculating-fcff-and-fcfe\\\/\"},\"author\":{\"name\":\"Irene R\",\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/#\\\/schema\\\/person\\\/7002f30d8f174958802c1c30b167eaf5\"},\"headline\":\"Calculating FCFF and FCFE\",\"datePublished\":\"2021-07-21T02:08:17+00:00\",\"dateModified\":\"2026-02-25T17:21:58+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/cfa-level-2\\\/calculating-fcff-and-fcfe\\\/\"},\"wordCount\":652,\"keywords\":[\"Calculating FCFF and FCFE\",\"CFA-level-2\",\"Equity Valuation\",\"Reading 28: Free Cash Flow Valuation\"],\"articleSection\":[\"CFA Level II Study Notes\",\"Equity Valuation\"],\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/cfa-level-2\\\/calculating-fcff-and-fcfe\\\/\",\"url\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/cfa-level-2\\\/calculating-fcff-and-fcfe\\\/\",\"name\":\"Calculating FCFF and FCFE | CFA Level II\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/#website\"},\"datePublished\":\"2021-07-21T02:08:17+00:00\",\"dateModified\":\"2026-02-25T17:21:58+00:00\",\"author\":{\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/#\\\/schema\\\/person\\\/7002f30d8f174958802c1c30b167eaf5\"},\"description\":\"Learn how to calculate FCFF and FCFE using net income, EBIT, EBITDA, and cash flow from operations in equity valuation analysis.\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/cfa-level-2\\\/calculating-fcff-and-fcfe\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/cfa-level-2\\\/calculating-fcff-and-fcfe\\\/\"]}]},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/cfa-level-2\\\/calculating-fcff-and-fcfe\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"Calculating FCFF and FCFE\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/#website\",\"url\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/\",\"name\":\"CFA, FRM, and Actuarial Exams Study Notes\",\"description\":\"Question Bank and Study Notes for the CFA, FRM, and Actuarial exams\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/#\\\/schema\\\/person\\\/7002f30d8f174958802c1c30b167eaf5\",\"name\":\"Irene R\",\"image\":{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/secure.gravatar.com\\\/avatar\\\/33caf1e1bcb63ee970b36351f165c7bc714b19614993ab9c2c8bf36273b7df48?s=96&d=mm&r=g\",\"url\":\"https:\\\/\\\/secure.gravatar.com\\\/avatar\\\/33caf1e1bcb63ee970b36351f165c7bc714b19614993ab9c2c8bf36273b7df48?s=96&d=mm&r=g\",\"contentUrl\":\"https:\\\/\\\/secure.gravatar.com\\\/avatar\\\/33caf1e1bcb63ee970b36351f165c7bc714b19614993ab9c2c8bf36273b7df48?s=96&d=mm&r=g\",\"caption\":\"Irene R\"},\"url\":\"https:\\\/\\\/analystprep.com\\\/study-notes\\\/author\\\/irene\\\/\"}]}<\/script>\n<meta property=\"og:video\" content=\"https:\/\/www.youtube.com\/embed\/A10ZXpSEZaM\" \/>\n<meta property=\"og:video:type\" content=\"text\/html\" \/>\n<meta property=\"og:video:duration\" content=\"3023\" \/>\n<meta property=\"og:video:width\" content=\"480\" \/>\n<meta property=\"og:video:height\" content=\"270\" \/>\n<meta property=\"ya:ovs:adult\" content=\"false\" \/>\n<meta property=\"ya:ovs:upload_date\" content=\"2021-07-21T02:08:17+00:00\" \/>\n<meta property=\"ya:ovs:allow_embed\" content=\"true\" \/>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"Calculating FCFF and FCFE | CFA Level II","description":"Learn how to calculate FCFF and FCFE using net income, EBIT, EBITDA, and cash flow from operations in equity valuation analysis.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/calculating-fcff-and-fcfe\/","og_locale":"en_US","og_type":"article","og_title":"Calculating FCFF and FCFE | CFA Level II","og_description":"Learn how to calculate FCFF and FCFE using net income, EBIT, EBITDA, and cash flow from operations in equity valuation analysis.","og_url":"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/calculating-fcff-and-fcfe\/","og_site_name":"CFA, FRM, and Actuarial Exams Study Notes","article_published_time":"2021-07-21T02:08:17+00:00","article_modified_time":"2026-02-25T17:21:58+00:00","author":"Irene R","twitter_card":"summary_large_image","twitter_misc":{"Written by":"Irene R","Est. reading time":"2 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/calculating-fcff-and-fcfe\/#article","isPartOf":{"@id":"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/calculating-fcff-and-fcfe\/"},"author":{"name":"Irene R","@id":"https:\/\/analystprep.com\/study-notes\/#\/schema\/person\/7002f30d8f174958802c1c30b167eaf5"},"headline":"Calculating FCFF and FCFE","datePublished":"2021-07-21T02:08:17+00:00","dateModified":"2026-02-25T17:21:58+00:00","mainEntityOfPage":{"@id":"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/calculating-fcff-and-fcfe\/"},"wordCount":652,"keywords":["Calculating FCFF and FCFE","CFA-level-2","Equity Valuation","Reading 28: Free Cash Flow Valuation"],"articleSection":["CFA Level II Study Notes","Equity Valuation"],"inLanguage":"en-US"},{"@type":"WebPage","@id":"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/calculating-fcff-and-fcfe\/","url":"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/calculating-fcff-and-fcfe\/","name":"Calculating FCFF and FCFE | CFA Level II","isPartOf":{"@id":"https:\/\/analystprep.com\/study-notes\/#website"},"datePublished":"2021-07-21T02:08:17+00:00","dateModified":"2026-02-25T17:21:58+00:00","author":{"@id":"https:\/\/analystprep.com\/study-notes\/#\/schema\/person\/7002f30d8f174958802c1c30b167eaf5"},"description":"Learn how to calculate FCFF and FCFE using net income, EBIT, EBITDA, and cash flow from operations in equity valuation analysis.","breadcrumb":{"@id":"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/calculating-fcff-and-fcfe\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/analystprep.com\/study-notes\/cfa-level-2\/calculating-fcff-and-fcfe\/"]}]},{"@type":"BreadcrumbList","@id":"https:\/\/analystprep.com\/study-notes\/cfa-level-2\/calculating-fcff-and-fcfe\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/analystprep.com\/study-notes\/"},{"@type":"ListItem","position":2,"name":"Calculating FCFF and FCFE"}]},{"@type":"WebSite","@id":"https:\/\/analystprep.com\/study-notes\/#website","url":"https:\/\/analystprep.com\/study-notes\/","name":"CFA, FRM, and Actuarial Exams Study Notes","description":"Question Bank and Study Notes for the CFA, FRM, and Actuarial exams","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/analystprep.com\/study-notes\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/analystprep.com\/study-notes\/#\/schema\/person\/7002f30d8f174958802c1c30b167eaf5","name":"Irene R","image":{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/secure.gravatar.com\/avatar\/33caf1e1bcb63ee970b36351f165c7bc714b19614993ab9c2c8bf36273b7df48?s=96&d=mm&r=g","url":"https:\/\/secure.gravatar.com\/avatar\/33caf1e1bcb63ee970b36351f165c7bc714b19614993ab9c2c8bf36273b7df48?s=96&d=mm&r=g","contentUrl":"https:\/\/secure.gravatar.com\/avatar\/33caf1e1bcb63ee970b36351f165c7bc714b19614993ab9c2c8bf36273b7df48?s=96&d=mm&r=g","caption":"Irene R"},"url":"https:\/\/analystprep.com\/study-notes\/author\/irene\/"}]},"og_video":"https:\/\/www.youtube.com\/embed\/A10ZXpSEZaM","og_video_type":"text\/html","og_video_duration":"3023","og_video_width":"480","og_video_height":"270","ya_ovs_adult":"false","ya_ovs_upload_date":"2021-07-21T02:08:17+00:00","ya_ovs_allow_embed":"true"},"_links":{"self":[{"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/posts\/18199","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/comments?post=18199"}],"version-history":[{"count":39,"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/posts\/18199\/revisions"}],"predecessor-version":[{"id":42397,"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/posts\/18199\/revisions\/42397"}],"wp:attachment":[{"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/media?parent=18199"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/categories?post=18199"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/analystprep.com\/study-notes\/wp-json\/wp\/v2\/tags?post=18199"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}