Doubt - Concept Project Finance
Is CFADS (Cash Flow Available for Debt Service) = UFCF (Unlevered Free Cash Flow), as both of them is cash flow previous to interest?
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Based on the most helpful WSO content, CFADS (Cash Flow Available for Debt Service) and UFCF (Unlevered Free Cash Flow) are not exactly the same, although they both represent cash flows before interest payments.
Unlevered Free Cash Flow (UFCF) is the cash flow available to all investors (both debt and equity) before taking into account interest expenses. It's calculated as EBIT (or operating income) * (1 - tax rate) + Depreciation + Amortization - change in net working capital - capital expenditures.
On the other hand, CFADS is a term more commonly used in project finance and it represents the cash available for servicing the project's debt, including the repayment of principal and interest on loans. It's a measure of a project's ability to generate enough cash to pay its debt obligations.
So, while both are measures of cash flow before interest payments, they are used in different contexts and calculated differently.
Sources: Levered vs. Unlevered Free Cash Flow Difference, Walk me through a DCF, Free Cash Flow Question
And how do you calculate CFADS then as you say it is different to UFCF?
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