Unlevered Free Cash Flow Calculator

Unlevered free cash flow, or UFCF, estimates the cash generated by a business before interest expense, debt repayment, dividends, or new borrowing. This calculator starts from EBIT, taxes that operating profit to estimate NOPAT, adds back depreciation and amortization, subtracts capital expenditures, and includes working-capital change using the sign convention in the calculator. The result is an enterprise-level cash-flow measure, not a shareholder-only distribution.

UFCF is central to enterprise discounted cash flow analysis because it separates operating performance from financing choices. A highly levered company and a debt-free company can be compared more cleanly when interest expense and principal payments are left out. If you want a multi-starting-point firm cash-flow bridge, use the FCFF calculator. If you want cash after mandatory debt repayment, use the levered free cash flow calculator. If you want cash to common shareholders after net borrowing, use the FCFE calculator.

What this calculator calculates

The calculator has five inputs: EBIT, effective tax rate, depreciation and amortization, capital expenditures, and change in working capital. EBIT can be positive or negative. The tax rate must be between zero and 100. Depreciation and amortization and CapEx are entered as positive numbers. Working-capital change is signed for cash impact: positive means cash inflow, negative means cash outflow.

The result includes NOPAT, depreciation and amortization add-back, CapEx, working-capital change, net reinvestment, and the effective tax rate. Net reinvestment is calculated as CapEx minus depreciation and amortization minus working-capital change. The primary result is unlevered free cash flow.

Formula

First calculate NOPAT:

$\text{NOPAT} = \text{EBIT} \times (1 - \text{tax rate})$

Then calculate UFCF:

$\text{UFCF} = \text{NOPAT} + \text{D\&A} - \text{CapEx} + \text{working-capital change}$

Net reinvestment shown in the result list is:

$\text{net reinvestment} = \text{CapEx} - \text{D\&A} - \text{working-capital change}$

Checking the primary result

The default inputs are EBIT of $1,000,000, an effective tax rate of 25%, depreciation and amortization of $150,000, CapEx of $300,000, and working-capital change of negative $50,000.

Calculate NOPAT:

$\text{NOPAT} = \$1{,}000{,}000 \times (1 - 25\%) = \$750{,}000$

Then calculate UFCF:

$\text{UFCF} = \$750{,}000 + \$150{,}000 - \$300{,}000 - \$50{,}000 = \$550{,}000$

The negative $50,000 working-capital change reduces cash flow because the calculator adds it directly. The net reinvestment item is:

$\text{net reinvestment} = \$300{,}000 - \$150{,}000 - (-\$50{,}000) = \$200{,}000$

That net reinvestment ties back to the cash-flow bridge. NOPAT of $750,000 minus net reinvestment of $200,000 equals UFCF of $550,000. The same relationship is useful when reviewing forecast models because it shows how much after-tax operating profit is being consumed by asset growth and working-capital needs.

How UFCF is used in valuation

UFCF is normally projected in an enterprise DCF model. Analysts forecast revenue, margins, taxes, depreciation and amortization, capital expenditures, and working capital, then discount the resulting UFCF at WACC. The present value of those cash flows plus terminal value equals enterprise value. Equity value is then found by subtracting net debt and other non-equity claims.

Because UFCF excludes financing, it is useful for comparing companies with different debt levels. A firm can have weak net income because of heavy interest expense but still produce strong UFCF. Another firm can have attractive accounting earnings but weak UFCF if it must spend heavily on replacement assets or inventory. The calculation makes reinvestment visible.

UFCF is also useful for scenario work because each driver can be tested separately. Margin improvement lifts EBIT and NOPAT. Higher tax assumptions reduce NOPAT. Larger maintenance or growth CapEx reduces cash flow. A working-capital release increases cash flow in this calculator, while a working-capital build reduces it. That structure makes the metric easier to audit than a single bottom-line cash-flow number.

UFCF versus FCFF

Many finance texts use unlevered free cash flow and free cash flow to firm as near synonyms. The difference on this site is mostly practical. The FCFF calculator lets you start from net income, EBIT, EBITDA, or CFO, and it handles after-tax interest add-backs when needed. This UFCF page always starts from EBIT and explicitly calculates NOPAT. That makes it cleaner for learning and for models where operating income is the forecast driver.

Common pitfalls

• Subtracting interest expense from EBIT before using this calculator. Interest is excluded from unlevered cash flow.
• Entering a working-capital increase as a positive number when it consumed cash. In this calculator, cash uses should be negative.
• Treating D and A as a permanent source of cash without checking whether CapEx is high enough to maintain the asset base.
• Applying a tax rate to EBITDA rather than EBIT. This calculator taxes EBIT through NOPAT.
• Comparing UFCF with equity value without subtracting debt from enterprise value.
• Using one year’s CapEx when the company is between investment cycles.

Sources

• CFI, Unlevered Free Cash Flow — UFCF definition and operating cash-flow bridge.
• NYU Stern, Aswath Damodaran, FCFF valuation lecture — enterprise cash-flow valuation framework.