I know you add back the Interest Exp (1-T) because it is unlevered....
but why do you subtract capital expenditures and +- net working capital?
thanks guys!
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because they take up cash...
You do this because FCF (levered or not) needs to account for 1.) the fact that a growing business generally requires more net working capital (since this is effectively a net 'trade credit' extended by the company) and 2.) the fact that some level of maintenance (and sometimes growth) capital expenditures are required to keep a business running.
So while working capital and Capex are not technically 'mandatory' payments for a business, for all intents and purposes they might as well be; as such, you need to deduct these non-discretionary (or 'non-free') uses of cash flow.
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