Free Cash Flow to the Firm Valuation
Overview
Equity
Equity Holders
{% Equity \, Value = \sum_t \frac{Cash \, Flow \, to \, Equity_t}{(1+r_e)^t} %}
Here the rate used to discount the equity cash flows is {% r_e %}, the cost of equity, or the expected return demanded by
equity holders. If the firm fails to earn the cost of equity on average for its shareholders, the price of the firm will
decline until the rate of return equals the demanded value.
CAPM
