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TSW Inc. had the following data for last year: Net income = $800; Net operating profit...

TSW Inc. had the following data for last year: Net income = $800; Net operating profit after taxes (NOPAT) = $700; Total assets = $3,000; and Total operating capital = $2,000. Information for the just-completed year is as follows: Net income = $1,000; Net operating profit after taxes (NOPAT) = $900; Total assets = $2,600; and Total operating capital = $2,500. How much free cash flow did the firm generate during the just-completed year?

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Answer #1

Answer:

Given information:

  • Net operating profit after taxes (NOPAT) = $900 (just completed year)
  • Total operating capital = $ 2,000 (for last year)
  • Total operating capital = $ 2,500 (just completed year)

Calculation of Free cash flows for just completed year:

Particulars Amount Amount
Free cash flows for this year

=Net operating profit after taxes - Net Investment in new Operating Capital

= $900 - $500

= $400

 $400

Working notes:

  • Net Investment in new Operating Capital =  TOC(just completed year) - TOC(last year) =$2,500 - $ 2,000 = $ 500
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