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in this video we're going to take a look at equity valuation using a free cash flow to the firm model and previously we did a couple of examples with free cash flow to equity so this is just a little bit different this is looking at free cash flow to the firm and again this is going to have a step by step example so you might want to go to the address here tiny oral comm brokkr F C F F to get this template then you can have that right with you as you walk through the example now we're going to start with the definition of free cash flow to the firm you can see we start out just like we did with free cash flow to equity our net income and then we add back in our depreciation because depreciation was a non-cash expense so it lowered our net income but it didn't lower our free cash flows take out the capital expenditures take out any increase in non-cash working capital for instance for inventory went up if our accounts receivable went up those are things that cost us cash flows today for

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