5.1.1. Perpetuity of the FCFE

This approach assumes a constant FCFE that will grow at the rate g_FCFE and will be discounted through r_e:

• \(Operational\ equity\ value=\frac{{FCFE}_1}{r_e-g_{FCFE}}\)

The g_FCFE refers to the effective growth and FCFE

• \(g_{FCFE}=\left(1+inf\right)\left(1+{real\ g}_{FCFE}\right)-1\)

• \({FCFE}_1={FCFE}_0\times(1+g_{FCFE})\)

It represents a significant simplification and in situations where the company is growing, restructuring or simply changing cycle, it is preferable to opt for solutions that permit the finding the a stable FCFE year.