When estimating a firm's FCFF we CANNOT ignore interest expenses because there is no way to incorporate these expenses into the cost of capital calculation.

Question

Quizplus · Accepted Answer

Interest expenses should be incorporated into the cost of capital calculation, which is used in estimating the firm's FCFF. Ignoring interest expenses would result in an inaccurate estimate of FCFF.

When Estimating a Firm's FCFF We CANNOT Ignore Interest Expenses