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Strategies & Market Trends : Free Cash Flow as Value Criterion -- Ignore unavailable to you. Want to Upgrade?

To: Andrew who wrote (202)11/12/1997 7:47:00 AM
From: Reginald Middleton  Respond to of 253
 
<And I would indeed say, for a given future rate of growth, the more FCF you have, the better. Or if you want to throw WACC and risk into the mix, why not "All else being equal, the more FCF the better".>

If you increase FCF while at the same time increasing your WACC at a greater rate, your are destroying value for your shareholders. That is why you must look at both the risk and the reward sides of the equation to obtain an accurate answer.



To: Andrew who wrote (202)11/12/1997 2:18:00 PM
From: Pirah Naman  Read Replies (1) | Respond to of 253
 
Andrew:

> Semantics indeed. I would propose DFCF instead of DCF which is > misleading(sounds like just "cash flow").

I would second this, though when I read "FCF" I assume the implicit discounting (so to me it seems redundant, but hey, I'll go along with the program). When I read DCF I think of "Dual Cash Flow" - the method used by Ernst and Fotta.

Pirah


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