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How do you find OFCF using WACC after tax?

How do you find OFCF using WACC after tax?

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Answer #1

OFCF is the operating free cash flows. It is the cash flow which is free from all obligations. Generally, it is calculated as after deducting operating expenses and capital expenditure from the revenues.

Given the WACC after tax, we can calculate OFCF using value of the firm which consists both of equity and debt.

Lets say, V is the value of the firm

WACC is the weighted average cosy of capital after tax, then

V = OFCF / WACC

OFCF = V * WACC

So, it is value of the firm multiplied by average cost of capital after tax.

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