Free Cash Flow to Firm (FCFF) represents the cash generated by a company's operations available to all capital providers — equity holders and lenders — before debt service payments. FCFF = EBIT × (1 - tax rate) + Depreciation - Capex - ΔWCR. It is the reference cash flow for the enterprise value DCF model, discounted at the WACC to obtain enterprise value directly. Its construction requires careful normalisation of maintenance vs. growth capex, working capital changes and the effective tax rate applied to operating income.

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Example: a Swiss industrial SME presents EBIT of CHF 2.4 million, tax rate 14%, depreciation CHF 600,000, capex CHF 800,000 and working capital increase of CHF 200,000. FCFF = 2.4 × (1 - 0.14) + 0.6 - 0.8 - 0.2 = CHF 1.664 million. Projected and discounted at a WACC of 9.0% with 2.0% terminal growth, the enterprise value from the DCF is CHF 22.5 million.

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Hectelion builds FCFF-based DCF models with rigorous normalisation of capex and working capital assumptions, documented to withstand counterparty and auditor scrutiny.