ISSUE 4– DATE 19 JULY 2015
1. INTRODUCTION AND OBJECTIVE
This article attempts to discuss on some basic principles that should be considered when determining the WACC, which is the discount rate used when using the FCFF method (discussed in Topic 2).
|Free Cash Flow to Firm (FCFF)||
FCFF derives the enterprise value attributable to the stakeholders which comprise of both the equity and debt providers of a proposed power plant under evaluation.
The Internal rate of Return (IRR), as determined using the net cash flow from FCFF is known as the project IRR.
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Chartered Financial Analyst
Global Association of Risk Professionals (GARP)