Homework Answers
a) NOPAT = EBIT * (1 - taxes)
= 2740 * (1 - 0.4)
= $1644
b)
operating cash flow = NOPAT + Depreciation
= 1644 + 1610
= $3254
c)
free cash flows = operating cash flow - change in fixed assets(investment in fixed assets) - change in net working capital
net working capital= current assets - current liabilities
change in fixed assets = 29450 - 28060
= 1390
change in current assets(except inventory) = 8210 - 6960
= 1250
change in current liabilities = (1570+190 -1530 - 260)
= -30
change in net working capital 1250 - (-30) = 1280
so free cash flow = 3254 - 1390 - 1280
= $584
d)
A - NOPAT = 1644
depreciation = 1610
both are approximately same size
since OCF = NOPAT + Depreciation
OCF is twice the size of NOPAT So this statement is true
C - this is also true because FCF arrives after deducting investment in fixed assets and changes in NWC
D - it can be clearly seen that kieth has postive cash flows from operating activities.so this statement is true
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