The Free Cash Flow (FCF) formula comes in several equivalent forms, depending on whether you start from EBITDA or Operating Profit (EBIT).
Here are the main formulas identified:

1. From EBITDA (Most Common Approach)

This formula highlights the tax savings generated by depreciation:

FCF = EBITDA (1 – T) + T Depreciation and Amortization – Delta WCR – Capital Expenditure (Capex)

• EBITDA: Cash operating profit.
• T: Income tax rate.
• T × D&A: Represents the tax shield generated by the  and amortization expenses which don’t generate any cash outlay.
• Delta WCR: Change in Working Capital Requirement.
• Investments: Capital expenditures (Capex) to maintain or develop the business.

2. From EBIT (Operating Profit)

This formulation amounts to the same mathematical result:

FCF = EBIT (1 – T) + Depreciation and amortization – Delta WCR – Capital expenditure

EBIT (1 – T) is also known as NOPAT (Net Operating Profit After Tax)
Here, the operating profit net of tax (NOPAT) is calculated, to which all the depreciation is reintegrated (because it is a calculated undisbursed expense) before subtracting the investments in WCR and fixed assets.

3. Committed Capital Approach (Synthetic Vision)

There is also a simplified version showing that the FCF is what remains of the result after financing the growth of the economic asset:

FCF = EBIT (1 – T) – Delta CE

• Delta CE (Change in Capital Employed) corresponds to the sum of the change in working capital and the increase in net fixed assets (Investments – Depreciation).

Important points for the calculation:

• Exclusion of financial expenses: The FCF is calculated before financial expenses because the remuneration of creditors is taken into account via the discount rate (CMPC) and not in the flows.
• The “With/Without” principle: In the context of a specific investment project, the flows must be “delta” flows, measuring the difference between the company’s situation with the project and without the project.