Free Cash Flow Formula - from CFI

1. Difference between FCFF vs FCFE
The key difference between Unlevered Free Cash Flow (Free Cash Flow to Firm) and Levered Free Cash Flow (Free Cash Flow to
Equity) is that Unlevered Free Cash Flow excludes the impact of interest expense and net debt issuance (repayments), whereas
Levered Free Cash Flow includes the impact of interest expense and net debt issuance (repayments).
below are a few methods to calculate both Unlevered and Levered Free Cash Flow.

2. FCFF vs FCFE Formulation
How to Calculate Unleverage Free Cash Flow (FCFF)
• EBIT * (1-Tax Rate) + Non-Cash Expense – Changes in Operating Assets & Liabilities - Capex
• Cash Flow from Operations + Tax Adjusted Interest Expense - Capex
• Net Income + Tax Adjusted Interest Expense + Non Cash Expenses – Changes in Operating Assets & Liabilities - Capex
How to Calculate Leverage Free Cash Flow (FCFE)
Additional information :
 Tax Adjusted Interest Expense = Interest * (1-Tax Rate)
 EBIT * (1- Tax Rate) = Net Income + Tax Adjusted Interest Expense
 Cash Flow from Operations = Net Income + Non Cash Expense – Changes in Operating Assets & Liabilities
• Net Income + Non Cash Expenses – Changes in Operating Assets & Liabilities – Capex + Net Debt Issued (Repaid)
• Cash Flow From Operations – Capex + Net Debt Issued (Repaid)