Homework Answers
Blastel Inc has a higher free cash flow than
Santel does.
NOPAT of Blatel Inc =EBIT*(1-Tax Rate)
=122500*(1-35%)=79625
NOPAT of Sanetel Inc =EBIT*(1-Tax Rate)
=87220*(1-35%)=56693
Return on Invested Capital of Blatel Inc =NOPAT/Invested Capital
=79625/343000 =23.21%
Return on Invested Capital of Sanetel Inc =NOPAT/Invested Capital
=56693/181300 =31.27%
Option a is correct option. ROIC should be greater than WACC.
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