The Net Cash Flow to Equity refers to the cash flow available to pay out to equity holders (in the form of dividends) who have invested to finance the operations of the business enterprise. The actual value paid out from the equity net cash flow to shareholders is determined by the dividend policy of the business enterprise. The net cash flow to equity is computed as: Net Income (after-tax)  + Non-cash charges (e.g., depreciation, amortisation, deferred revenue, deferred taxes)  – Capital expenditures necessary to support projected operations  – Additions (deletions) to net working capital necessary to support projected operations  + Changes in long-term debt from borrowings necessary to support projected operations  – Changes in long-term debt for repayments necessary to support projected operations  = Net cash flow to equity  – Dividends paid to preferred shareholders  = Net cash flow to common shareholders’ equity (after-tax) When discounting net cash flow to equity, the appropriate discount rate is the cost of equity. The net cash flow to equity is also referred to as Equity Net Cash Flow. In business valuation analytical work the net cash flow to equity is reviewed and adjustments made to ensure that the net cash and cash balances which moves into the statement of financial position are appropriate and not overstated or understated.