You can use the levered or unlevered free cash flow to value a company using the DCF method of valuation. However, there are different situations when you prefer one over the other. This article discusses three specific instances when you should use the unlevered free cash flow instead of the levered free cash flow when valuing a company using the DCF method.
You should use the unlevered FCF when valuing a company using the DCF method when you are interested in valuing the firm as a whole.
You should focus on valuing the firm as a whole when 1) the firm has a lot of leverage, 2) the leverage expects to change during the forecast period, and/or 3) you do not have detailed information on debt or interest expenses. In these stated cases, you are better off valuing the firm as you do not have to account for the debt repayment/issue and interest expenses cash flows.
Please also read when you would prefer to use the levered cash flows in valuing the firm using a DCF method.