. Evaluating free cash flows and return on invested capital

You are an industry analyst for the telecom sector. You are analyzing financial reports from two companies: Talker Corp. and MobileTalk Inc. Corporate tax for both firms is 35%. Your associate analyst has calculated and compiled, in the following table, a list of important figures you need for the analysis:

Data Collected

	Talker Corp.	MobileTalk Inc.
EBIT	$164,000	$60,000
Depreciation	$54,120	$19,800
Total operating capital	$720,000	$374,400
Net investment in operating capital	$360,000	$156,000
WACC	11.85%	11.88%

In your analysis, you want to look for several characteristicsone 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 Talker Corp. is , whereas the NOPAT for MobileTalk Inc. is .
	Talker Corp. has a free cash flow of , whereas, MobileTalk Inc. has a free cash flow of .
	Talker Corp. has a return on invested capital than MobileTalk 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 a company has negative NOPAT but a positive free cash flow, then the firm could be in a high-growth phase and making investments in operating capital to support growth.

If a company has positive NOPAT but a negative free cash flow, then the firm could be in a high-growth phase and making investments in operating capital to support growth.