TSW Inc

Business May 23, 2021

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 net operating capital = $2,000. Information for the just-completed year is as follows: Net income = $1,000; Net operating profit after taxes (NOPAT) = $925; Total assets = $2,600; and Total net operating capital = $2,500. How much free cash flow did the firm generate during the just-completed year?

Expert Solution

Answer:

Free Cash Flow = NOPAT - Net investment in total operating capital

Free Cash Flow = NOPAT - Change in Net Working Capital

Free Cash Flow = $925 - ($2,500 - $2,000)

Free Cash Flow = $925 - $500

Free Cash Flow = $425

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