AC food manufacturing is evaluating a potential investment’s free cash flow. Below is the related information:

Net Operating Income (RM 2,000,000)
Net Operating Profit after Taxes (RM 600,000)
Depreciation Expense (RM 200,000)
Capital Expenditures (CAPEX) (RM 500,000)
Change in Net Operating Working Capital (RM 100,000)

Required

a) Evaluate the free cash flow for the potential investment.

b) Discuss FOUR (4) differences between free cash flow and the firm’s operating cash flow.

c) Explain why the project cash flow should include an incremental cash flow for working capital. 

Subject: Financial Management