Free Cash Flow to Equity (FCFE) is the residual cash flow available to equity holders after meeting all company obligations — operating costs, taxes, working capital needs, capex and debt service. FCFE = FCFF - After-tax interest expense + Net borrowing. It is discounted at the cost of equity to derive directly the equity value, without passing through the enterprise value bridge. FCFE is particularly relevant for financial institution valuation, where debt is an operational input rather than a financing choice, and for dividend capacity analysis.

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Example: a Swiss asset management company presents FCFF of CHF 1.5 million, after-tax financial charges of CHF 120,000 and net debt repayment of CHF 200,000. FCFE = CHF 1.5m - 0.12m - 0.2m = CHF 1.18 million. Discounted at a cost of equity of 11.0%, the equity value is CHF 16.9 million — directly comparable to the equity value derived from a WACC-based DCF (enterprise value CHF 20.0 million minus net debt CHF 3.1 million = CHF 16.9 million).

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Hectelion uses FCFE in financial institution valuations and shareholder distribution capacity analyses, triangulating against enterprise-level DCF for consistency.