Unlevered Free Cash Flow Calculator
Calculate Unlevered Free Cash Flow (UFCF) to determine the cash available to all providers of capital. This calculator helps assess enterprise value and perform DCF valuation analysis.
Operating Cash Flow Data
Tax Shield Data
Unlevered Free Cash Flow Results
Unlevered Free Cash Flow:
$0.00
Tax Shield:
$0.00
Cash Generation:
N/A
Valuation Analysis
FCF Quality:
N/A
Growth Potential:
N/A
Investment Appeal:
N/A
Business Insights
Financial Health:
N/A
Capital Allocation:
N/A
Enterprise Value:
N/A
Understanding Unlevered Free Cash Flow
Unlevered Free Cash Flow (UFCF) represents the cash available to all providers of capital (both debt and equity holders) after accounting for operating expenses, taxes, and necessary capital expenditures. It's a key metric for enterprise valuation and DCF analysis.
What is Unlevered Free Cash Flow?
Definition
- Cash available to all capital providers
- Before interest payments (unlevered)
- After operating expenses and capex
- Used for enterprise valuation
Formula
- UFCF = Operating Cash Flow - CapEx + Tax Shield
- UFCF = EBIT × (1 - Tax Rate) + Depreciation - CapEx - ?NWC
- Alternative: NOPAT - Investment in Operating Capital
- Expressed in currency units
UFCF vs Levered FCF
Cash Flow Perspectives
Different valuation approaches
Unlevered Free Cash Flow:
- Available to all capital providers
- Before interest payments
- Used for enterprise valuation
- Capital structure neutral
Levered Free Cash Flow:
- Available to equity holders
- After interest payments
- Used for equity valuation
- Reflects capital structure
Components of UFCF
Starting Point:
- EBIT (Earnings Before Interest and Taxes)
- NOPAT (Net Operating Profit After Tax)
- Operating cash flow
- Pre-tax, pre-interest cash flow
Adjustments:
- Add back tax shield from interest
- Subtract capital expenditures
- Adjust for working capital changes
- Add back depreciation (non-cash)
UFCF in DCF Valuation
| Valuation Method | Cash Flow Used | Discount Rate | Result |
|---|---|---|---|
| Enterprise DCF | Unlevered FCF | WACC | Enterprise Value |
| Equity DCF | Levered FCF | Cost of Equity | Equity Value |
| APV Method | UFCF + Tax Shield | Unlevered Cost of Equity | Enterprise Value |
Tax Shield in UFCF
Interest Tax Shield:
- Tax savings from interest expense
- Interest Expense × Tax Rate
- Added back to unlevered cash flow
- Represents value of debt tax shield
Why Add Back:
- UFCF assumes no debt (unlevered)
- Tax shield is a benefit of leverage
- Separate from operating cash flow
- Properly accounts for tax benefits
Capital Expenditures
Types of CapEx:
- Maintenance capital expenditures
- Growth capital expenditures
- Replacement of existing assets
- Expansion and new projects
CapEx Treatment:
- Subtracted from operating cash flow
- Represents investment in future growth
- Critical for sustainable cash flow
- Affects terminal value calculations
UFCF Growth and Trends
Growth Drivers:
- Revenue growth
- Margin expansion
- Working capital efficiency
- Capital expenditure optimization
Trend Analysis:
- Historical UFCF patterns
- Comparison to net income
- Peer company analysis
- Industry benchmarking
UFCF Quality Assessment
High-Quality UFCF:
- Consistent and growing
- Supported by operations
- Minimal accounting adjustments
- Sustainable capital requirements
Low-Quality UFCF:
- Volatile or declining
- Heavy reliance on accounting adjustments
- Unsustainable capex reductions
- Working capital manipulation
UFCF in Mergers & Acquisitions
Valuation Multiples:
- EV/UFCF multiples
- Comparable company analysis
- Precedent transactions
- Control premium adjustments
Synergy Analysis:
- Cost synergy projections
- Revenue synergy estimates
- Combined UFCF analysis
- Integration planning
Key Takeaways for Unlevered Free Cash Flow
- Unlevered free cash flow represents cash available to all capital providers before interest payments
- UFCF is calculated by adjusting operating cash flow for capital expenditures and tax shields
- UFCF is used in enterprise DCF valuation to determine the value of the entire business
- The tax shield from interest expense is added back to show the true unlevered cash flow
- UFCF quality depends on sustainability of cash flows and capital expenditure requirements
- Growing UFCF indicates improving business performance and value creation
- UFCF is preferred over levered FCF for comparing companies with different capital structures
- Understanding UFCF is essential for accurate business valuation and investment analysis