Unlevered Free Cash Flow Calculator

Background.

Profit and cash part company in most real businesses. A manufacturer can report healthy operating profit in a year it spends heavily on new machinery and lets customers pay later, and end the year with less cash than it started. Unlevered free cash flow is the measure that reconciles the two: the cash the operations throw off after paying tax and reinvesting in the business, before a cent goes to lenders or shareholders.

Leaving financing out is the point. Because interest and debt repayments are excluded, two companies with identical operations but different borrowing show the same unlevered cash flow. That is why it is the input to an enterprise-value discounted cash flow model: you project it year by year, discount it at the weighted average cost of capital, and the result is the value of the whole business, to be divided between debt and equity afterwards. The tax benefit of debt is not lost; it is counted once, inside the cost of capital, which is why it must not be counted again here.

The arithmetic starts from EBIT, operating profit before interest and tax, and taxes it as if the company had no debt. That gives net operating profit after tax. Depreciation and amortization are then added back, because they reduce profit without any cash leaving the business that year. Capital expenditure, which is real cash spent on long-lived assets, is taken off, along with any extra money tied up in receivables and inventory net of what suppliers are owed.

One year's figure can mislead. A company in a heavy build-out phase can show negative unlevered cash flow for years and still be worth a great deal, so the number earns its keep over a projection, not in isolation.

What is unlevered free cash flow calculator?

Unlevered free cash flow, also called free cash flow to the firm (FCFF), is the cash a business generates from its operations after tax and after the investment needed to sustain and grow them, measured as though the company carried no debt. It is the cash available to all providers of capital together, lenders and shareholders alike, which is why interest payments, borrowing and repayments are left out of it.

How to use this calculator.

1. 01Enter EBIT, the operating income line on the income statement. Strip out one-off items such as restructuring charges or asset-sale gains if you want a figure that represents ongoing operations.
2. 02Enter the marginal tax rate on operating profit. It is applied to EBIT as if there were no interest deduction, so do not lower it to reflect the company's borrowing.
3. 03Enter depreciation and amortization from the cash flow statement, and capital expenditure from the investing section, usually labelled purchases of property, plant and equipment.
4. 04Enter the increase in operating working capital as a positive number if more cash got tied up in receivables and inventory net of payables, or as a negative number if working capital was released. Leave cash and short-term debt out of it.
5. 05Read the unlevered free cash flow, and check the net operating profit after tax shown beside it to see how much of the result came from profit before the cash adjustments.

The formula.

Unlevered FCF = EBIT × (1 − T) + D&A − CapEx − ΔNWC. The first term, EBIT × (1 − T), is net operating profit after tax (NOPAT): operating profit taxed at rate T, with T entered as a percentage and divided by 100. Because the tax is charged on EBIT rather than on profit after interest, the figure ignores the interest tax shield; that benefit belongs in the after-tax cost of debt within WACC. D&A is added back because it is a non-cash charge. CapEx is the cash spent on fixed and intangible assets, and ΔNWC is the increase in operating working capital, both subtracted because they absorb cash. If EBIT is negative, the formula applies the same tax rate and so treats the loss as saving tax.

A worked example.

Frequently asked questions.

References& sources.

1. [1]OpenStax, Rice University. Principles of Finance, 2022. Chapters 6–10. Retrieved 2026-08-06.
2. [2]U.S. Internal Revenue Service. Tax guidance current 2026. Official forms, instructions and tax topics. Retrieved 2026-08-06.
3. [3]U.S. Securities and Exchange Commission. Investor.gov current 2026. Investment products and risk. Retrieved 2026-08-06.