when to use what model in equity

[h21]

Firm cap structure stable ———————> use FCFE (the reason given is it’s easier)
Firm cap structure changing —————–> use FCFF
Ownership perspective ———————-> use FCFF
Dividends aligned with profitability ——–> some version of GGM
Dividends not aligned with profitability —> FCFE
non control perspective-Dividend
FCFE aligh with profitability-FCFE model


I saw this list from a post in this forum, and added last two, I am confused why ownership perspective uses FCFF not FCFE?

 

[bfry]

I would use FCFE for that. I guess it just depends on the info that is given. If you use FCFF for an equity ownership perspective then you have the added step of subtracting off the debt. But if net borrowing is not given then I guess you are forced to.
I would add RI model to that as well for firms that may have negative CF and not pay dividends. Also for firms with large amounts of intangibles.