Hi everybody. Two quick questions. First: when should I use FCFF and FCFE? Second: when valuing a company, after I reach a final value of, let´s say, $ 100, but the company only has 50% of free float. Do I have to multiply the final value ($ 100) by 2, to take into account the percentage of shares outstanding so I can finally arrive at the share price? Or the valuation itself already takes that into account? Thanks a lot.

Question

anonymous · Answer

Cool. Generally, we should always attempt to calculate value of firm from FCFF, because computation FCFE is usually unstable over the years. From value of firm, we would then deduct the market value of debt to get value of equity.

on your second question, take the shares outstanding, save for any options that might be tied in.