Unlevered Free Cash Flow Calculator
Enter EBIT, the tax rate, depreciation and amortization, capital expenditures and the cash effect of the change in working capital to see unlevered free cash flow.
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Unlevered Free Cash Flow Calculator
Our Unlevered Free Cash Flow Calculator shows the cash a business produces from its operations before any payments to lenders. Type EBIT, the tax rate, depreciation and amortization, capital expenditures and the cash effect of the change in working capital. It returns unlevered free cash flow (UFCF) with the tax on EBIT, NOPAT and net reinvestment. It suits analysts building a discounted cash flow (DCF) model, investors comparing companies with different debt levels, finance students and owners valuing a business.
Quick answer
Unlevered free cash flow is EBIT × (1 − tax rate) + D&A − CapEx + change in working capital: with EBIT of 1,200,000 taxed at 25%, D&A of 150,000, CapEx of 300,000 and working capital using 50,000, 900,000 + 150,000 − 300,000 − 50,000 = 700,000.
- Working capital: enter a negative number when it grows (uses cash) and a positive one when it shrinks.
- Tax rate: the effective or marginal rate on operating profit, from 0% to 100%.
- Before debt: interest and loan repayments are not taken off.
- Used for: DCF models that value the whole company at the WACC.
What Is Unlevered Free Cash Flow?
Unlevered free cash flow (UFCF) is the cash a company generates from its operations after taxes and reinvestment, as if it had no debt. Interest and loan repayments are ignored, so the figure is the same whatever mix of debt and equity funds the business. It is also called free cash flow to the firm (FCFF).
Because it belongs to every provider of capital, lenders and shareholders alike, UFCF is the cash flow used in most discounted cash flow valuations. It makes two companies with very different borrowing easy to compare.
Unlevered Free Cash Flow Formula
+ D&A
− capital expenditures
+ change in working capital
- EBIT: earnings before interest and taxes, the operating profit from the income statement.
- Tax rate: the rate applied to EBIT. EBIT × (1 − tax rate) is NOPAT, net operating profit after tax.
- D&A: depreciation and amortization, added back because they reduce profit without using cash.
- Capital expenditures (CapEx): cash spent on property, plant, equipment and other long-term assets.
- Change in working capital: the cash effect of changes in receivables, inventory and payables. When working capital grows, cash is tied up, so the figure is negative.
The same result can be written as NOPAT minus net reinvestment:
reinvestment = CapEx − D&A
+ increase in working capital
How to Calculate Unlevered Free Cash Flow
A company has EBIT of 1,200,000 and a 25% tax rate. It records 150,000 of D&A, spends 300,000 on equipment and its working capital grows by 50,000:
+ 150,000 − 300,000 − 50,000
= 700,000
- Tax the operating profit. 1,200,000 × 0.75 = 900,000 of NOPAT.
- Add back D&A. 900,000 + 150,000 = 1,050,000.
- Subtract CapEx. 1,050,000 − 300,000 = 750,000.
- Adjust for working capital. 750,000 − 50,000 = 700,000.
Unlevered free cash flow is 700,000. Net reinvestment is 200,000 (300,000 − 150,000 + 50,000), and 900,000 − 200,000 gives the same answer.
From EBIT to Unlevered Free Cash Flow
The running total shows each adjustment in turn. Tax takes a quarter of EBIT, and reinvestment beyond D&A takes another 200,000.
Getting the Working Capital Sign Right
| What happened | Enter |
|---|---|
| Receivables or stock grew | Negative |
| Payables shrank | Negative |
| Receivables or stock fell | Positive |
| Payables grew | Positive |
Many textbooks write the formula with "minus the increase in working capital". This calculator asks for the cash effect instead, the way a cash flow statement shows it, so a growing working capital balance is typed as a negative number and a shrinking one as a positive number.
Unlevered Free Cash Flow Examples
A software company. EBIT of 500,000 taxed at 21%, D&A of 40,000, CapEx of 60,000 and working capital released 10,000 as customers paid faster:
395,000 + 40,000
− 60,000 + 10,000
= 385,000
Light reinvestment leaves almost all of NOPAT as free cash flow.
A fast-growing manufacturer. EBIT of 800,000 taxed at 30%, D&A of 100,000, CapEx of 550,000 and working capital grew by 180,000:
560,000 + 100,000
− 550,000 − 180,000
= −70,000
The business is profitable but is investing faster than it earns, so investors must fund the gap.
A small services firm. EBIT of 120,000 taxed at 20%, D&A of 15,000, CapEx of 25,000 and working capital grew by 5,000:
96,000 + 15,000
− 25,000 − 5,000
= 81,000
Unlevered vs Levered Free Cash Flow
| Measure | Debt payments |
|---|---|
| Unlevered FCF | Not taken off: cash for all investors |
| Levered FCF | Taken off: cash for shareholders |
Unlevered free cash flow is discounted at the weighted average cost of capital (WACC) to give enterprise value, the value of the whole business. Levered free cash flow is discounted at the cost of equity to value the shares alone. Use the Levered Free Cash Flow Calculator or the plain Free Cash Flow Calculator for those versions.
What Raises or Lowers Unlevered Free Cash Flow
Starting from the 700,000 example, each change below is made on its own:
| Change | UFCF |
|---|---|
| Starting point | 700,000 |
| EBIT up 10% | 790,000 |
| Working capital released 50,000 | 800,000 |
| Tax rate 30% | 640,000 |
| CapEx up 100,000 | 600,000 |
Changing the amount of debt does not move the result, which is exactly why UFCF is used to compare companies with different capital structures.
What the Result Leaves Out
- Losses. With negative EBIT the formula gives a tax credit. If the business cannot use one, enter a 0% tax rate.
- Interest tax shield. Tax is worked out on EBIT, as if there were no interest; the benefit of debt sits in the WACC instead.
- Other non-cash items. Stock-based pay, impairments or deferred tax are not added back unless you adjust EBIT first.
- One period. CapEx and working capital swing from year to year; a DCF projects several years.
The result is for education and planning and is not financial or investment advice.
Key Terms
- Unlevered FCF
- Cash for all investors, before debt payments.
- FCFF
- Free cash flow to the firm, another name for UFCF.
- EBIT
- Earnings before interest and taxes.
- NOPAT
- EBIT × (1 − tax rate).
- D&A
- Depreciation and amortization, non-cash costs.
- WACC
- The discount rate for unlevered cash flows.
How to Use the Unlevered Free Cash Flow Calculator
- Enter EBIT. Type operating profit for the period, such as 1,200,000. It can be negative.
- Enter the tax rate. Type the tax rate on operating profit as a percent, such as 25.
- Enter D&A and CapEx. Type depreciation and amortization, such as 150,000, and capital expenditures, such as 300,000.
- Enter the change in working capital. Type its cash effect: negative when working capital grows (such as −50,000), positive when it shrinks. Type 0 if it did not change.
- Read and copy the result. Unlevered free cash flow appears as you type, with the working, the tax on EBIT, NOPAT and net reinvestment. Press Copy to copy it, or Clear or Esc to start again.
Example: EBIT of 120,000 taxed at 20%, D&A of 15,000, CapEx of 25,000 and working capital using 5,000 give unlevered free cash flow of 81,000.
Who Can Use This Calculator?
Frequently Asked Questions (FAQs)
How do you calculate unlevered free cash flow?
Multiply EBIT by one minus the tax rate to get NOPAT, add back depreciation and amortization, subtract capital expenditures, then add the cash effect of the change in working capital (negative when working capital grows).
What is the unlevered free cash flow formula?
UFCF = EBIT × (1 − tax rate) + D&A − capital expenditures + change in working capital.
What is the unlevered free cash flow for EBIT of 1,200,000, a 25% tax rate, D&A of 150,000, CapEx of 300,000 and working capital using 50,000?
It is 700,000, because 1,200,000 × 0.75 = 900,000 and 900,000 + 150,000 − 300,000 − 50,000 = 700,000.
What is the difference between unlevered and levered free cash flow?
Unlevered free cash flow is before interest and debt payments and belongs to all investors. Levered free cash flow is after debt payments and belongs to shareholders only.
Is unlevered free cash flow the same as FCFF?
Yes. Free cash flow to the firm (FCFF) and unlevered free cash flow describe the same cash flow, available to lenders and shareholders together.
Why is unlevered free cash flow used in a DCF?
Because it ignores how the company is financed, it can be discounted at the WACC to value the whole business, giving enterprise value.
Can unlevered free cash flow be negative?
Yes. Heavy capital spending or fast growth in working capital can exceed NOPAT, which means the business needs new funding.
Is the Unlevered Free Cash Flow Calculator free?
Yes. It is free to use, with no sign-up and no limit on how many times you use it.
Sources
- Corporate Finance Institute. Unlevered Free Cash Flow.
- Corporate Finance Institute. DCF Formula Guide.
- WallStreetMojo. Unlevered Free Cash Flow (UFCF).
- Wikipedia. Free cash flow.
- Wikipedia. Net operating profit after taxes.
- Wikipedia. Earnings before interest and taxes.
Try our Unlevered Free Cash Flow Calculator to see the cash a business produces before any payments to lenders.