Will an unlevered DCF and a levered DCF yield the same results?

In a levered DCF, the analysis takes into account the capital structure of the company, specifically the presence of debt. This means that the cash flows used in a levered DCF are after interest expenses have been deducted, reflecting the cash available to equity holders only. On the other hand, an unlevered DCF examines the total cash flows of the business before any debt payments, providing a view of the company's overall value as if it were financed entirely with equity.

Since the two approaches focus on different types of cash flows—levered cash flows in the levered DCF and unlevered cash flows in the unlevered DCF—they cannot yield the same results unless the company is entirely debt-free. This fundamental difference is why the levered DCF will typically show a lower value compared to the unlevered DCF for firms that do carry debt, as the latter captures the total economic value available to all capital providers.

Thus, considering the effect of debt, the correct understanding is that an unlevered DCF and a levered DCF will not yield the same outcomes due to their inherent differences in cash flow consideration.