Forecasting Free Cash Flow

As discussed previously, FCF can be forecasted by making assumptions about the components of the FCF formula and forecasting them into the future.

Some other factors that might affect FCF include:

• Opportunity Costs (Alternative uses of resources)

• Project Externalities (Cannibalization, spillovers)

• Sunk Costs (Usually Ignored)

• Other non-cash items (amortization etc.)

• Salvage values

• Execution Risk

• Cash flow frequency (Project dependent)