Earnings and Cash Flows: A Primer on Free Cash Flow
Musings on Markets
OCTOBER 25, 2022
In the Microsoft FCFF calculation, this would imply replacing the effective tax rate of 13.83% with an average effective tax rate of 22%, using the 2017-2021 time period, which would lower free cash flows to the firm. With enterprise value multiples, you can scale enterprise value to FCFF, instead of using EBITDA or revenues as your scalar.
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