FCFF - Free Cash Flow to Firm — Smart Financial Analysis
Calculate FCFF for DCF valuation. FCFF is the cash flow available to all capital providers—debt and equity holders.
Why This Matters for Your Finances
Why: FCFF is the cash flow available to all capital providers—both debt and equity holders—after operating expenses, taxes, and necessary reinvestments. It represents unlevered free ...
How: Enter EBIT ($), Tax Rate (%), Depreciation & Amortization ($) to get instant results. Try the preset examples to see how different scenarios affect the outcome, then adjust to match your situation.
- ●FCFF = EBIT × (1 - Tax Rate) + Depreciation & Amortization - Capital Expenditures - Change in Net Working Capital.
- ●FCFF is unlevered (available to all investors); FCFE is levered (available only to equity holders after debt service).
- ●FCFF is discounted at WACC to derive enterprise value.
- ●FCFF yield = FCFF / Enterprise Value.
📊 Real Company Examples — Click to Load
Financial Data
Valuation Parameters
📐 Calculation Breakdown
FCFF Waterfall
FCFF vs FCFE Comparison
FCFF Trend
Cash Flow Components
⚠️For educational purposes only — not financial advice. Consult a qualified advisor before making decisions.
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FCFF: Cash Flow for All Capital Providers
FCFF is the cash flow available to ALL capital providers—both debt and equity holders. It is the foundation of DCF (Discounted Cash Flow) valuation, which determines the intrinsic value of 90% of equities. Apple generates $89.3B FCFF while Amazon's massive $55B CapEx reduces its FCFF to just $5.4B despite $21B EBIT. This is why Amazon trades at higher revenue multiples.
Sources: CFA Institute, Damodaran (NYU), SEC EDGAR, McKinsey Valuation
FCFF Formula
NOPAT (EBIT after tax) plus non-cash D&A, minus reinvestment (CapEx and ΔNWC).
FCFF = CFO + Interest(1-t) - CapEx
FCFF = (EBITDA - D&A)(1-t) + D&A - CapEx - ΔNWC
FCFF vs FCFE
FCFF is unlevered; FCFE is levered. FCFF excludes interest and debt repayments. Use FCFF for enterprise valuation; FCFE for equity valuation when capital structure is stable.
FCFF in DCF Valuation
Enterprise Value = FCFF / (WACC - g). Equity Value = EV + Cash - Debt. Share Price = Equity Value / Shares. WACC reflects blended cost of debt and equity.
Multi-year DCF
For multi-year projections: EV = Σ FCFF_t / (1+WACC)^t + Terminal Value. Terminal Value = FCFF_n × (1+g) / (WACC - g).
FCFF Yield
FCFF Yield = FCFF / Enterprise Value. Higher yield may indicate undervaluation. Compare across peers in the same industry.
Unlevered Free Cash Flow
Unlevered FCF = FCFF. It excludes financing effects, ideal for comparing companies with different leverage.
Key Components
- NOPAT: EBIT × (1 - Tax Rate) — operating profit after tax
- D&A: Non-cash add-back — depreciation and amortization from income statement
- CapEx: Reinvestment in fixed assets — from cash flow statement
- ΔNWC: Change in working capital — (Current Assets - Current Liabilities) change
All figures from SEC 10-K filings. CapEx excludes acquisitions.
When to Use FCFF
Use FCFF for M&A, enterprise valuation, companies with changing leverage, and when comparing firms with different capital structures.
Limitations
FCFF assumes perpetual growth. Sensitive to WACC and terminal growth. Less reliable for early-stage or highly cyclical companies.
- Terminal growth assumption can distort valuation
- WACC estimation errors compound
- Early-stage firms: negative FCFF common
- Cyclical firms: use normalized FCFF