How do you compute free cash flows to firm (FCFF)?

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How do you compute free cash flows to firm (FCFF)?

Free cash flow to firm is a commonly used matrix to calculate the fair value of the firm.

Free cash flow to the firm is identified by reducing capex from the operating cash flows of the company.

The precise formula to calculate Free cash flow to the firm (FCFF) is

NOPAT (EBIT *(1– Tax rate))

+/- changes in working capital

+ Depreciation and Amortisation - capital expenditure

+/- Deferred tax assets/liabilities

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