To qualify this post I have about 6 months of LBO modeling experience. As a general rule, I calculate FCF for debt paydown as:
FCFDP = NI + Depreciation + Amortization - Capex +/- Change in NWC
I am aware there are multiple ways to think about arriving at a FCF calculation but am curious why it's common to use an iterative calculation, IE starting at NI, rather than starting at EBIT*(1-tax rate)?
You wouldn't build a full scale LBO standalone without an operating model. To keep it consistent, you would add your non-cash expenses back to NI.
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