Free Cash Flow to Equity (FCFE) Calculator
FCFE (Free Cash Flow to Equity) is the cash remaining for equity shareholders after covering operating expenses, capital expenditures and net debt obligations. It is the cornerstone of equity DCF valuation — also called the levered free cash flow.
Cash available to equity holders after meeting all operating costs, CapEx and debt obligations
- 1
Start with net income
300,000 - 2
Add depreciation & amortisation
300,000 + 80,000 = 380,000 - 3
Subtract capital expenditures
380,000 − 120,000 = 260,000 - 4
Subtract increase in working capital
260,000 − 20,000 = 240,000 - 5
Add net borrowings → FCFE
240,000 + 50,000 = 290,000New debt adds cash available to equity holders; debt repayment reduces it.
How does this calculator work?
FCFE = Net Income + D&A − CapEx − ΔWorking Capital + Net Borrowings. It measures cash genuinely available to equity shareholders after all costs, investment and debt movements. Discounting FCFE at the cost of equity gives intrinsic equity value — the foundation of levered DCF valuation.
Formula
How this is calculated
FCFE starts with net income — the accounting profit after interest and taxes — then adds back non-cash depreciation and amortisation (D&A), which is a real expense on the income statement but not a cash outflow. Capital expenditures are subtracted because they are real cash payments for long-term assets (unlike depreciation, which merely charges prior CapEx over time). Any increase in net working capital (current assets minus current liabilities) consumes cash and is therefore subtracted; a decrease releases cash and is added. Finally, new borrowings add cash available to equity holders, while debt repayments reduce it, so the net change in debt (net borrowings = new debt − repaid debt) is added.
FCFE differs from FCFF (free cash flow to the firm) in that FCFE is already net of debt service and therefore represents only the equity claimants' share. In a DCF model, FCFE is discounted at the cost of equity (e.g., the CAPM rate) rather than the WACC, and the result is the equity value directly — no need to subtract debt, as it has already been accounted for.
A key limitation is that FCFE can be volatile and distorted by changes in the working capital assumption, large one-off CapEx, or aggressive debt management. Analysts often average FCFE over several years or normalise CapEx before using it as a valuation base.
Frequently asked questions
FCFF (free cash flow to the firm) is calculated before debt payments and belongs to all capital providers — debt and equity. FCFE is after debt service and belongs only to equity holders. FCFF is discounted at WACC to get enterprise value; FCFE is discounted at the cost of equity to get equity value directly.
Yes. Negative FCFE means the company is consuming more cash than it generates for equity holders, often during heavy investment or high debt-repayment periods. Sustained negative FCFE typically requires equity issuance or signals financial stress.
New debt directly adds cash to the company which equity holders can use once operating and CapEx needs are met. Debt repayment does the opposite. Adding net borrowings (new debt minus repaid debt) captures the net cash impact of financing decisions on equity.
Also known as
TG we-Calculate Editorial Team. (2026). Free Cash Flow to Equity (FCFE) Calculator [Online calculator]. TG we-Calculate. https://we-calculate.com/calculator/free-cash-flow-to-equity-calculator
TG we-Calculate Editorial Team. "Free Cash Flow to Equity (FCFE) Calculator." TG we-Calculate. 2026. https://we-calculate.com/calculator/free-cash-flow-to-equity-calculator.
TG we-Calculate Editorial Team, "Free Cash Flow to Equity (FCFE) Calculator," TG we-Calculate, 2026. [Online]. Available: https://we-calculate.com/calculator/free-cash-flow-to-equity-calculator
@misc{wecalculate_free_cash_flow_to_equity_calculator, title = {Free Cash Flow to Equity (FCFE) Calculator}, author = {{TG we-Calculate Editorial Team}}, howpublished = {\url{https://we-calculate.com/calculator/free-cash-flow-to-equity-calculator}}, year = {2026}, note = {TG we-Calculate} }
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