# What is my unlevered free cash flow?

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.

- Page: https://www.acalculator.org/finance/unlevered-free-cash-flow-calculator
- JSON spec: https://www.acalculator.org/finance/unlevered-free-cash-flow-calculator.json
- Version: f3a1c41e5558

## Default answer

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.

## Inputs

| Key | Label | Description |
| --- | --- | --- |
| ebit | Operating income (EBIT) | Earnings before interest and taxes for the year. Negative for an operating loss. |
| tax | Tax rate | The income tax rate on operating income, for example the marginal or effective rate. |
| da | Depreciation and amortization | The year’s depreciation and amortization, non-cash costs already taken off EBIT. |
| capex | Capital expenditures | Cash spent on property, plant, equipment and other long-term assets in the year. |
| nwc | Increase in net working capital | How much non-cash working capital (inventory and receivables minus payables) grew in the year. Negative when it shrank. |

## Outputs

| Key | Label | Description |
| --- | --- | --- |
| ufcf | Unlevered free cash flow | NOPAT + depreciation and amortization − capital expenditures − increase in net working capital. |
| nopat | NOPAT (EBIT after tax) | EBIT × (1 − tax rate). |
| netCapex | Net capital expenditures | Capital expenditures − depreciation and amortization. |
| reinvestment | Reinvestment | Net capital expenditures + increase in net working capital. |

## 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.

## Assumptions

- 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

1. ebit = $1,000,000.00, tax = 25%, da = $200,000.00, capex = $300,000.00, nwc = $50,000.00 gives ufcf = $600,000.00, nopat = $750,000.00, netCapex = $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.
2. ebit = $500,000.00, tax = 21%, da = $80,000.00, capex = $60,000.00, nwc = -$25,000.00 gives ufcf = $440,000.00, nopat = $395,000.00, netCapex = -$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.
3. ebit = -$200,000.00, tax = 25%, da = $120,000.00, capex = $250,000.00, nwc = $10,000.00 gives ufcf = -$290,000.00, nopat = -$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.
4. ebit = $1,234,567.89, tax = 26.5%, da = $98,765.43, capex = $150,000.00, nwc = $12,345.67 gives ufcf = $843,827.16, nopat = $907,407.40, netCapex = $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.

## FAQ

### 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.

## Sources

- Aswath Damodaran, NYU Stern School of Business, Variables used in Data Set: free cash flow to the firm, FCFF = EBIT (1 − t) − (capital expenditures − depreciation) − change in non-cash working capital; net capital expenditures = capital expenditures − depreciation. https://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/variable.htm (retrieved 2026-10-19)
- Aswath Damodaran, The Little Book of Valuation, Estimating Cashflows: free cash flow to the firm = after-tax operating income − reinvestment, where reinvestment = capital expenditures − depreciation + change in non-cash working capital; the cash flow to the firm is before interest and principal payments on debt, with operating income taxed as if the whole of it were taxable. https://pages.stern.nyu.edu/~adamodar/New_Home_Page/littlebook/cashflows.htm (retrieved 2026-10-19)
- OpenStax, Principles of Finance, 5.6 Operating Cash Flow and Free Cash Flow to the Firm (FCFF): free cash flow is the cash available to repay debt or pay dividends after covering operations and capital assets. https://openstax.org/books/principles-finance/pages/5-6-operating-cash-flow-and-free-cash-flow-to-the-firm-fcff (retrieved 2026-10-19)