Free Cash Flow to Firm
Free Cash Flow to Firm (FCFF) is the cash flow generated by a company's operations that is available to all providers of capital (both debt and equity holders) after taxes and reinvestment in the business, before debt service.
Example: In a valuation scenario, if EBIT is $120 million, a 30% tax rate, depreciation of $25 million, capital expenditures of $50 million, and an increase in working capital of $10 million, FCFF is approximately $49 million (120 * 0.70 + 25 - 50 - 10).
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