# 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

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

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.

Next Section: 5.1.2. FCFE for multiple periods and a residual value