Question

Giglio Inc. has the following information for the previous year: Net income = $400; Net operating profit after taxes (NOPAT) = $500; Total assets = $2,000; and Total operating capital = $1700. The information for the current year is: Net income = $800; Net operating profit after taxes (NOPAT) = $700; Total assets = $2,300; and Total operating capital = $2,100. What is the free cash flow for the current year?

Answer 1

the free cash flow for the current year is zero.

Step-by-step explanation:

Net income = $400; Net operating profit after taxes (NOPAT) = $500; Total assets = $2,000; and Total operating capital = $1700

Net income = $800; Net operating profit after taxes (NOPAT) = $700; Total assets = $2,300; and Total operating capital = $2,100.

current year:

operating profit after taxes 700

Capital expenditures: 2,000 - 2,300 = (300)

working capital expeneses 1,700 - 2,100 = (400)

free cash flow: 0

As assets increase the company use cash to increase his assets

Also, the operating capital increase the comapny pa debts, extend his collection cycle or any other desition which, increases his cahs needs.

Therefore the free cash flow for the year is zero.