FCFF vs Unlevered FCF - is there a difference?
This may sound stupid but I am confused. I've been learning with a Rosenbaum's book and it states the following:
EBIT - tax + D&A - Capex - change in NWC (when negative then + when positive then -) = FCF
On the other hand, I have a cash flow statement that a friend of mine (who is an investment banker) and he did the following: EBITDA - tax - change in NWC + long-term investments - provisions for accruals - capex = FCFF
Isn't FCF and FCFF the same? Which approach is correct?
Free cash flow to the firm is synonymous with unlevered free cash flow. Unlevered FCF is FCF to the enterprise, i.e., the "firm".
FCFF is not the same as CFO - CAPEX because Cash from operations starts with net income instead of NOPAT, where NOPAT (net operating profit after taxes) is EBIT * (1 - t).