In an unlevered DCF model, which of the following reflects the most reasonable approach and rationale for the treatment of stock-based compensation (SBC) in the calculation of unlevered free cash flows (UFCF)?

Add back SBC to EBIT in the calculation of UFCFs, since it is a non-cash expense.

Add back SBC to EBIT in the calculation of UFCFs, since the extra share dilution must be offset by a higher UFCF value.

Subtract SBC from EBIT in the calculation of UFCFs, since it reflects a real cost and must reduce the value of UFCFs.

Do not add back SBC to EBIT in the calculation of UFCFs, as SBC does reflect an economic cost and must be accounted for.

None of the above.