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If that company then used this Operating Cash Flow to pay down debt and as a result was debt-free after 3-5 years, then subsequent FCFF would essentially be equal to FCFE. The cash flows would presumably be used to pay dividends. What discount rate would you use? WACC or cost of equity? In theory the company could choose not to pay down debt as quickly, in which case you'd discount FCFF by WACC? Does the fact that all of the FCFF would actually go to equity holders change the discount rate you use?
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