B-2

In 2010, Retail Stuff Inc. had sales of $500 million. Operating costs, depreciation and interest were $250 million, $20 million and $15 million respectively.

Its corporate tax rate is 35%. The company reported $50 million in operating current assets and $20 million in operating current liabilities. It also reported net property, plant and equipment of $80 million.

For 2009, net operating working capital was $35 million and total net operating capital was $100 million.

Required:

With respect to 2010:

(a) What was the companys net income?

(b) What was the companys NOPAT?

(c) What was the companys Free Cash Flow from Operations?

(d) What was the gross investment in property, plant and equipment during the year?

(e) What was the companys Free Cash Flow to Equity for the year?

(f) Explain the difference between Net Operating Profit after Taxes and Net Income. Which is a better measure of the performance of a companys operations and why?