The formula to calculate the Free Cash Flow to Equity (FCFE) is:
\[ \text{FCFE} = \text{CO} - \text{CE} + \text{D} \]
Where:
Free Cash Flow to Equity (FCFE) is the total cash available to equity shareholders after all expenses, reinvestment, and debt repayment. It represents the cash that could be distributed to shareholders as dividends or used for share buybacks. FCFE is an important measure for investors as it indicates the financial health and profitability of a company.
Let's assume the following values:
Using the formula to calculate the Free Cash Flow to Equity:
\[ \text{FCFE} = 500,000 - 200,000 + 50,000 = 350,000 \text{ dollars} \]
The Free Cash Flow to Equity (FCFE) is $350,000.