Ogier Incorporated currently has $700 million in sales, which are projected to grow by 8% in Year 1 and by 3% in Year 2

1). Computation of the projected sales in year 1 and 2:-

Projected sales = Current sales * (1 + Growth rate)

Sales in year 1 = $700 * (1 + 8%)

= $756 million

Sales in year 2 = $756 * (1 + 3%)

= $778.68 million

2). Computation of the projected amounts of net operating profit after taxes (NOPAT) for Years 1 and 2:-

NOPAT = Sales * Operating profitability

NOPAT for year 1 = $756 * 7%

= $52.92 million

NOPAT for year 2 = $778.68 * 7%

= $54.51 million

3). Computation of the projected amounts of total net operating capital (OpCap) for Years 1 and 2:-

Net operating capital = Sales * Capital requirement

Net operating capital for year 1 = $756 * 65%

= $491.40 million

Net operating capital for year 2 = $778.68 * 65%

= $506.14 million

4). Computation of the projected FCF for Year 2:-

Additional capital expenditure = $506.14 - $491.40

= $14.74 million

FCF for year 2 = NOPAT - Additional capital expenditure

= $54.51 - $14.74

= $39.77 million