What is my unlevered free cash flow?
Enter operating income (EBIT), the tax rate, depreciation and amortization, capital expenditures and the change in net working capital. The unlevered free cash flow calculator taxes EBIT, adds back the non-cash costs, and subtracts what the business reinvested.
- Unlevered free cash flow
- $600,000.00
Operating income of $1,000,000.00 taxed at 25% leaves NOPAT of $750,000.00; after reinvestment of $150,000.00, unlevered free cash flow is $600,000.00.
- NOPAT (EBIT after tax)
- $750,000.00
- Net capital expenditures
- $100,000.00
- Reinvestment
- $150,000.00
Unlevered free cash flow: $600,000.00. Operating income of $1,000,000.00 taxed at 25% leaves NOPAT of $750,000.00; after reinvestment of $150,000.00, unlevered free cash flow is $600,000.00.
The results are estimates for information only. They are not financial, tax, or legal advice. Check the numbers with your lender or a qualified professional before you decide. Terms of use
How to calculate
Computes unlevered free cash flow (free cash flow to the firm): EBIT after tax, plus depreciation and amortization, minus capital expenditures and the increase in net working capital.
Example with the default inputs (Operating income (EBIT) $1,000,000.00, Tax rate 25%, Depreciation and amortization $200,000.00, Capital expenditures $300,000.00, Increase in net working capital $50,000.00): Operating income of $1,000,000.00 taxed at 25% leaves NOPAT of $750,000.00; after reinvestment of $150,000.00, unlevered free cash flow is $600,000.00.
Method: NOPAT = EBIT × (1 − tax rate ÷ 100). Net capital expenditures = capital expenditures − depreciation and amortization. Reinvestment = net capital expenditures + increase in net working capital. Unlevered free cash flow = NOPAT − reinvestment.
- Tax is charged on all of operating income, as if the business had no debt; an operating loss is taxed at the same rate (it saves tax).
- The cash flow is before interest and debt repayments, so it belongs to lenders and owners together.
- Arithmetic is exact on the typed decimals; money shows to the cent, halves up.
Worked examples
Each example is checked against the calculator on every build.
- Operating income (EBIT) $1,000,000.00, Tax rate 25%, Depreciation and amortization $200,000.00, Capital expenditures $300,000.00, Increase in net working capital $50,000.00 gives Unlevered free cash flow $600,000.00, NOPAT (EBIT after tax) $750,000.00, Net capital expenditures $100,000.00, Reinvestment $150,000.00.Source: Aswath Damodaran, NYU Stern, Variables used in Data Set (FCFF = EBIT (1 − t) − (capital expenditures − depreciation) − change in non-cash working capital). https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/variable.htm; The Little Book of Valuation, Estimating Cashflows (free cash flow to the firm = after-tax operating income − reinvestment, before interest and principal payments). https://pages.stern.nyu.edu/~adamodar/New_Home_Page/littlebook/cashflows.htm
- Operating income (EBIT) $500,000.00, Tax rate 21%, Depreciation and amortization $80,000.00, Capital expenditures $60,000.00, Increase in net working capital -$25,000.00 gives Unlevered free cash flow $440,000.00, NOPAT (EBIT after tax) $395,000.00, Net capital expenditures -$20,000.00, Reinvestment -$45,000.00.Source: Aswath Damodaran, NYU Stern, Variables used in Data Set (FCFF = EBIT (1 − t) − (capital expenditures − depreciation) − change in non-cash working capital). https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/variable.htm; The Little Book of Valuation, Estimating Cashflows (free cash flow to the firm = after-tax operating income − reinvestment, before interest and principal payments). https://pages.stern.nyu.edu/~adamodar/New_Home_Page/littlebook/cashflows.htm
- Operating income (EBIT) -$200,000.00, Tax rate 25%, Depreciation and amortization $120,000.00, Capital expenditures $250,000.00, Increase in net working capital $10,000.00 gives Unlevered free cash flow -$290,000.00, NOPAT (EBIT after tax) -$150,000.00, Reinvestment $140,000.00.Source: Aswath Damodaran, NYU Stern, Variables used in Data Set (FCFF = EBIT (1 − t) − (capital expenditures − depreciation) − change in non-cash working capital). https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/variable.htm; The Little Book of Valuation, Estimating Cashflows (free cash flow to the firm = after-tax operating income − reinvestment, before interest and principal payments). https://pages.stern.nyu.edu/~adamodar/New_Home_Page/littlebook/cashflows.htm
- Operating income (EBIT) $1,234,567.89, Tax rate 26.5%, Depreciation and amortization $98,765.43, Capital expenditures $150,000.00, Increase in net working capital $12,345.67 gives Unlevered free cash flow $843,827.16, NOPAT (EBIT after tax) $907,407.40, Net capital expenditures $51,234.57, Reinvestment $63,580.24.Source: Aswath Damodaran, NYU Stern, Variables used in Data Set (FCFF = EBIT (1 − t) − (capital expenditures − depreciation) − change in non-cash working capital). https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/variable.htm; The Little Book of Valuation, Estimating Cashflows (free cash flow to the firm = after-tax operating income − reinvestment, before interest and principal payments). https://pages.stern.nyu.edu/~adamodar/New_Home_Page/littlebook/cashflows.htm
How it works
- NOPAT = EBIT × (1 − tax rate ÷ 100)
- Net capital expenditures = capital expenditures − depreciation and amortization
- Reinvestment = net capital expenditures + increase in net working capital
- Unlevered free cash flow = NOPAT − reinvestment = EBIT × (1 − tax rate) + depreciation and amortization − capital expenditures − increase in net working capital
Rules:
- EBIT and the change in net working capital may be negative. Depreciation and amortization and capital expenditures are $0 or more. The tax rate is 0% to 100%.
- Each amount is at most $1 quadrillion in size.
- A result that is not 0 but too small to show as a number gives no answer.
- The arithmetic is exact on the decimals you type. Money shows to the cent, with halves rounded up (away from 0).
Assumptions
- The tax rate applies to all of operating income, as if the business had no debt. An operating loss is taxed at the same rate, as if it saves tax; enter 0% if it does not.
- Working capital here is non-cash working capital: inventory, receivables and other current assets, minus payables and other current liabilities. Cash is left out.
Worked examples by hand
The default year. NOPAT = 1,000,000 × (1 − 0.25) = $750,000. Net capital expenditures = 300,000 − 200,000 = $100,000; reinvestment = 100,000 + 50,000 = $150,000. UFCF = 750,000 − 150,000 = $600,000.
Working capital shrinks. EBIT $500,000 at 21%: NOPAT = $395,000. Net capital expenditures = 60,000 − 80,000 = −$20,000; reinvestment = −20,000 − 25,000 = −$45,000. UFCF = 395,000 + 45,000 = $440,000.
An operating loss. EBIT −$200,000 at 25%: NOPAT = −$150,000. Reinvestment = 250,000 − 120,000 + 10,000 = $140,000. UFCF = −150,000 − 140,000 = −$290,000.
Cents and a fractional tax rate. EBIT $1,234,567.89 at 26.5%: NOPAT = 1,234,567.89 × 0.735 = $907,407.39915. UFCF = 907,407.39915 + 98,765.43 − 150,000 − 12,345.67 = 843,827.15915, shown as $843,827.16.
Other questions people ask
What is unlevered free cash flow?
Unlevered free cash flow (UFCF), also called free cash flow to the firm (FCFF), is the cash a business generates from its operations after taxes and after reinvesting in fixed assets and working capital, but before paying interest or repaying debt. It is the cash available to lenders and shareholders together.
How do I calculate unlevered free cash flow?
Multiply EBIT by 1 minus the tax rate to get NOPAT. Add depreciation and amortization, then subtract capital expenditures and the increase in net working capital. EBIT of $1,000,000 at 25% is $750,000; plus $200,000 of D&A, minus $300,000 of capital spending and a $50,000 rise in working capital, UFCF is $600,000.
What is the difference between levered and unlevered free cash flow?
Unlevered free cash flow is before interest and debt payments, so it does not depend on how the business is financed. Levered free cash flow (free cash flow to equity) subtracts interest after tax and net debt repayments, leaving what is left for shareholders.
Why is tax charged on EBIT and not on actual taxes paid?
Interest cuts the taxes a company pays. UFCF measures the business as if it had no debt, so tax is worked out on all of operating income. The tax benefit of debt is counted in the discount rate (the weighted average cost of capital) instead.
What does a negative change in working capital do?
When inventory and receivables fall, or payables rise, working capital shrinks and frees cash, which adds to free cash flow. Enter the change as a negative number: a $25,000 fall in working capital adds $25,000.
What is unlevered free cash flow used for?
It is the cash flow in a discounted cash flow (DCF) valuation of a whole business: each year’s UFCF is discounted at the weighted average cost of capital to give the enterprise value.