ModeldrillUnlevered to levered free cash flow
A financial modeling exercise from Modeldrill. Solve it with a live spreadsheet grid in your browser, with Fill right and Fill down, and it is checked the moment you submit.
The task
Move from the cash flow available to all investors to the cash flow left for shareholders. Fill the interest tax shield (row 8: interest times the tax rate in B2) and levered free cash flow (row 9: unlevered free cash flow less interest, plus the tax shield, less debt repayment), then the running total of levered free cash flow in row 10.
What this exercise teaches
Unlevered cash flow is discounted at the WACC; levered cash flow belongs to equity holders and is discounted at the cost of equity. Mixing the two, for instance discounting levered cash flow at the WACC, double counts the benefit of debt.
A hint if you get stuck
Interest is deductible, so its net cost is interest x (1 - tax rate): subtract the full interest and add the shield back. The running total anchors the start of its range: SUM($B$9:B9).
Try it now, free, no account needed
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