FCFF and FCFE Question common

BelalM

Why is it that Proceeds from issuing new common shares, and repurchases of shares have no effect on FCFF and FCFE?

neil1234

Proceeds from issuing new common shares are available to equity and debt providers of the firm.
Repurchase of shares is a use of free cash flow available to equity.
FCFE calculates the cash flow available to equity providers of the firm. That’s why no effect.
For eg: Interest is not available to equity providers and that’s why is deducted from FCFE.

comp_sci_kid

Thanks. I understand and know the formulas. I’m looking for a more logical explanation however?
If someone gives me $100, and I issue them a piece of paper that declares some % ownership, it would seem that would give me an extra $100 of free cash?

onelife1

FCFF = NI + Dep + Int(1-t) - FInv - WInv
FCFE = NI + Dep - FInv - WInv + Net borrowing
If you issue new shares or repurchase shares non of the above RHS figures change.