What constitutes the Enterprise Value of a business in an unlevered DCF analysis?

In an unlevered Discounted Cash Flow (DCF) analysis, Enterprise Value is derived from the present value of the company's future free cash flows, which represents the total cash generated by the business that is available to all capital providers, including both equity and debt holders.

Free Cash Flow is often calculated as operating cash flow minus capital expenditures, and in an unlevered context, it does not consider interest expenses, allowing for a focus on the core cash-generating ability of the business. When these future free cash flows are discounted back to the present using an appropriate discount rate (often the weighted average cost of capital), the sum of these discounted cash flows gives the Enterprise Value of the business.

This approach accurately reflects the resources available to all stakeholders in the company, thus providing a more comprehensive assessment of the company's valuation.