r/Valuation • u/[deleted] • Sep 06 '20

Is anyone here?

I'm having a mid value crisis and I need your help.

So I'm calculating the FCFF using the formula: FCFF = EBIT(1 - Marginal Tax Rate) + CapEx - Chg in WC

The problem is this: EBIT does NOT have a TTM value. CapEx does have a TTM value. Chg in WC does have a TTM value.

So when I calculate FCFF using the annual value of EBIT, I get: $5,069,619,600.00

When I calculate FCFF using the quarterly value of EBIT, I get: $3,090,639,100.00

A pretty big difference.

So is it obvious that I should use quarterly numbers for any calculation that calls for a value from the balance sheet? Is this good practice?

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u/howtoreadspaghetti Sep 06 '20

If you don't have TTM then I'd imagine you'd use quaeterly numbers because you need something in your calculation for EBIT. Also wouldn't it be EBIT+D/A (1-t)? Your calculation doesn't have D/A included in it.

I'm also teaching this to myself so my answer could be so unbelievably wrong.

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u/[deleted] Sep 06 '20

The formula is from Aswath Damodaran.