10. Evaluating free cash flows and return on invested capital You're an industry analyst for the telecomm sector, and have been analyzing financial reports from two companies: CellT Corp. and Talk2Me Inc. The corporate tax rate for both firms is 35%. Your associate analyst has calculated and compiled, in the following table, a list of important figures you'll probably need for the analysis: Talk2Me Inc. Data Collected CellT Corp. EBIT $102,500 Depreciation $41,000 Total operating capital $602,700 Net investment in operating capital $287,000 WACC 8.84% $72,980 $29,192 $470,270 $151,700 11.50% In your analysis, you want to look for several characteristics-one of them being the return on invested capital (ROIC). Using the information available, complete the following statements: The net operating profit after tax (NOPAT) for CellT Corp. is whereas the NOPAT for Talk2Me Inc. is CellT Corp. has a free cash flow of whereas, Talk2Me Inc. has a free cash flow of CellT Corp. has a return on invested capital than Talk2Me Inc. has Your inference from the analysis is that both firms are in a high-growth phase, and their growth will be profitable. Considering your analysis, which of Data Collected CellT Corp. EBIT $102,500 Depreciation $41,000 Total operating capital $602,700 Net investment in operating capital $287,000 WACC 8.84% Talk2Me Inc. $72,980 $29,192 $470,270 $151,700 11.50% In your analysis, you want to look for several characteristics-one of them being the return on invested capital (ROIC). Using the information available, complete the following statements: The net operating profit after tax (NOPAT) for CellT Corp. is whereas the NOPAT for Talk Melis CellT Corp. has a free cash flow of whereas, Talk2Me Inc. has a free cash flow of CellT Corp. has a return on invested capital than Talk2Me Inc. has. Your inference from the analysis is that both firms are in a high-growth phase, and their growth will be profitable. Considering your analysis, which of the following statements is true? IF ROIC is greater than the rate of return that investors require, which is the weighted average cost of capital (WACC), then the firm is adding value IF ROIC is less than the rate of return that investors require, which is the weighted average cost of capital (WACC), then the firm is adding value