How the Unlevered Free Cash Flow Calculator works
Unlevered free cash flow (UFCF) is the cash a company's operations generate before any interest payments or debt effects are considered. It represents cash available to every capital provider — both lenders and shareholders — which is why it is the cash flow figure analysts discount in an enterprise-value DCF (discounted cash flow) model rather than a figure that already reflects one company's specific capital structure.
The formula
Starting from EBIT (earnings before interest and taxes) and a tax rate, the calculator first finds NOPAT (net operating profit after tax):
NOPAT = EBIT × (1 − Tax Rate)
Unlevered free cash flow then adds back the non-cash depreciation & amortization (D&A) expense and subtracts cash reinvested in the business — capital expenditures (CapEx) and the increase in net working capital (ΔNWC):
UFCF = NOPAT + D&A − CapEx − ΔNWC
D&A is added back because it reduced EBIT on the income statement without ever using cash. CapEx and the increase in net working capital are subtracted because that cash left the business to fund equipment, facilities, inventory, or receivables growth. If net working capital decreases instead of increases, ΔNWC is negative and subtracting a negative number adds cash back to UFCF.
Worked example
Take EBIT of $5,000,000, a 25% tax rate, $800,000 of D&A, $1,200,000 of capex, and a $300,000 increase in net working capital. NOPAT is $5,000,000 × (1 − 0.25) = $3,750,000. Unlevered free cash flow is $3,750,000 + $800,000 − $1,200,000 − $300,000 = $3,050,000. Net reinvestment (capex plus the working capital increase, net of the D&A add-back) is $700,000, so about 81.3% of NOPAT converts through to free cash after funding growth.
What moves the result most
- EBIT and the tax rate: together they set NOPAT, the starting point for every other calculation — a higher tax rate shrinks UFCF dollar-for-dollar on the after-tax portion of EBIT.
- Capital expenditures: capital-intensive businesses (manufacturing, telecom, utilities) can show strong EBIT but modest UFCF once heavy reinvestment is subtracted.
- Net working capital: fast-growing companies often see net working capital rise as receivables and inventory grow with sales, which consumes cash even while accounting profit looks healthy.
UFCF versus levered free cash flow
Unlevered free cash flow excludes interest expense and debt principal payments entirely, so it is independent of how a company chooses to finance itself — this is what makes it the right cash flow to discount at the weighted average cost of capital (WACC) when estimating enterprise value. Levered free cash flow (free cash flow to equity) starts from UFCF and subtracts after-tax interest and net debt repayments (or adds net borrowing), leaving the cash available specifically to equity holders. This calculator computes UFCF only; it does not model interest expense, debt schedules, or discounting to present value.