# 5.1.1. Perpetuity of the FCFE

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

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

The gFCFE refers to the effective growth and FCFE

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

Remember that the perpetuity should be calculated with FCFE of the following year.

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

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.