π’ FCFF Calculator
Cash available to all investors.
Free cash flow to firm
Estimates for planning only, not financial advice.
Free cash flow to the firm is the cash available to every investor in the business, lenders and owners alike: NOPAT plus depreciation and amortization, minus CapEx, minus the change in net working capital. With EBIT of $10M, a 21% tax rate, $2M of D and A, $3M of CapEx, and a $0.5M working capital build, FCFF is $6.40M. This is the cash flow stream that discounted cash flow valuation discounts.
How to Use This Calculator
Enter EBIT from the income statement, the effective tax rate, non-cash D and A, CapEx, and the increase in net working capital (receivables plus inventory minus payables). Decreases in working capital free cash, so enter them as negatives.
Enter EBIT and the tax rate to get NOPAT, profit as if the firm had no debt.
Add back D and A, then subtract CapEx and the working capital change.
Read FCFF. For the equity holders' share after debt service, use our FCFE calculator.
The FCFF Formula
NOPAT strips out the financing decision: it is what profit would be with zero debt, so interest never enters. D and A are added back because they reduced EBIT without spending cash. CapEx is subtracted because it spent cash without reducing EBIT. Working capital increases consume cash (more inventory, more receivables), so they subtract; decreases add. The result belongs to the whole firm, which is why DCF discounts FCFF at WACC, the blended cost of debt and equity.
Worked Example
EBIT of $10M at a 21% tax rate gives NOPAT of $7.90M. Add $2M of D and A for $9.90M of operating cash. Subtract $3M of CapEx and $0.5M tied up in working capital: FCFF = $6.40M. If this firm sustains $6.4M of FCFF growing at 3% and WACC is 9%, the firm value is roughly 6.4 x 1.03 / (0.09 - 0.03) = $109.9M by the Gordon growth formula. That single division is the heart of DCF valuation.
FCFF vs FCFE vs Plain FCF
Three measures, three audiences. Plain FCF (operating cash flow minus CapEx) is the quick practitioner version. FCFF is the rigorous firm-wide version used in DCF. FCFE goes one step further and subtracts debt service to show what equity holders get. Analysts who mix them up discount the wrong cash flow at the wrong rate, the most common DCF error after bad growth assumptions. Use FCFF with WACC for enterprise value, FCFE with cost of equity for equity value.
My warning: FCFF is only as honest as its inputs, and CapEx plus working capital are where forecasts go to die. A five-year DCF with heroic CapEx declines is a fantasy with arithmetic. Stress-test with flat CapEx and see if the valuation survives. For valuing what the shares are worth, pair this with our intrinsic value calculator.
Estimates for planning only, not financial advice.
Frequently Asked Questions
What is free cash flow to the firm?
The cash generated by operations available to all capital providers, debt and equity, after operating needs and investments. It is the cash flow stream discounted in a standard DCF at the weighted average cost of capital.
How is FCFF different from FCFE?
FCFF is before debt payments and belongs to the whole firm; FCFE subtracts after-tax interest and adds net borrowing to show what equity holders receive. Discount FCFF at WACC, FCFE at the cost of equity.
Why start from EBIT instead of net income?
EBIT excludes interest, so NOPAT measures operating profit independent of financing. Starting from net income would require adding back after-tax interest anyway, which is the same thing with extra steps.
Why subtract the change in working capital?
Growing receivables and inventory tie up cash even though revenue is booked. A fast-growing company can be profitable on paper and cash-poor in reality, and the working capital line is where that shows up.
What tax rate should I use?
The effective cash tax rate on operating profit, often near the statutory rate for forecasts. Using a temporarily low rate from credits flatters NOPAT and overvalues the firm.
Can FCFF be negative?
Yes, for growing or heavy-investment firms. DCF handles it fine as long as later years turn positive. Persistent negative FCFF with no path to positive is a business model problem, not a valuation input problem.
How does FCFF connect to enterprise value?
Discount projected FCFF at WACC and sum the present values, plus a terminal value. The result is enterprise value; subtract net debt to reach equity value. Every DCF you have seen runs this pipeline.
What is the most common FCFF mistake?
Inconsistent CapEx and depreciation: forecasting depreciation far above CapEx forever implies the asset base shrinks to nothing. In steady state they should roughly match, or the model quietly liquidates the company.
How do I forecast FCFF for a DCF?
Project revenue, margins, and reinvestment needs year by year, then apply the FCFF formula to each year. Keep CapEx and depreciation consistent in steady state, grow working capital with revenue, and sanity-check the implied reinvestment rate against history.