Two-Stage Free Cash Flow to Equity (FCFE) Discount Model
Two-Stage Free Cash Flow to Equity (FCFE) Discount Model
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This model is designed to value the equity in a firm, with two stages of growth, an initial period of higher growth and a subsequent period of stable growth.
The user has to define the following inputs to the model:
1. Length of high growth period
2. Expected growth rate in earnings during the high growth period.
3. Capital Spending, Depreciation and Working Capital needs during the high growth period.
4. Expected growth rate in earnings during the stable growth period.
5. Inputs for the cost of equity.
Note: this model is being shared with the authorization of Professor Aswath Damodaran from NYU Stern Business School (www.damodaran.com)
The user has to define the following inputs to the model:
1. Length of high growth period
2. Expected growth rate in earnings during the high growth period.
3. Capital Spending, Depreciation and Working Capital needs during the high growth period.
4. Expected growth rate in earnings during the stable growth period.
5. Inputs for the cost of equity.
Note: this model is being shared with the authorization of Professor Aswath Damodaran from NYU Stern Business School (www.damodaran.com)