Free Cash Flow to Firm

FCFF is the cash the business itself produces, independent of how it is financed, which makes it the correct input to an enterprise-value DCF discounted at WACC. Because it is unaffected by borrowing decisions, it is more stable and more comparable across companies than FCFE. Note the tax treatment: EBIT is taxed as if the company had no debt, since the interest tax shield is captured in the discount rate rather than in the cash flow, and double-counting it is a common modelling error. A company with heavy growth capital expenditure can show negative FCFF for years while being fundamentally sound.