If you are using FCFE then, yes, an increase in debt would increase FCFE. Do note that we HIGHLY discourage the use of FCFE for DCF purposes unless it is in specific circumstances such as certain types of real estate projects and infrastructure/project finance modeling.

Then in case of real estate investment, in a year of acquisition, the considerations would be considered as an increase in capex, while the corresponding financing would increase debt, the resulting negative FCFE would be the equity invested in the project?

In the context of real estate financing, FCFE would only be calculated for IRR purposes. The debt financing is simply part of the equity/debt mix for the required CapEx at the inception of the project. In this case, the FCFE would need to incorporate the interest payments and any principal reduction... In the context of real estate financing, FCFE would only be calculated for IRR purposes. The debt financing is simply part of the equity/debt mix for the required CapEx at the inception of the project. In this case, the FCFE would need to incorporate the interest payments and any principal reduction. And this FCFE would imply that all of it is distributed out (assuming working capital minimum cash balance requirements are properly incorporated in the model already). Read More