Free Cash Flow vs. Net Income Watson Oil recently reported (in $ Millions) $8,250 of sales, $5,850 of operating costs other than depreciation, and $650 of depreciation. The company had $3,200 of outstanding bonds that carry a 5% interest rate, and its federal-plus-state income tax rate was 35%. In order to sustain its operations and thus generate future sales and cash flows, the firm was required to make $1,250 of capital expenditures on new fixed assets and to invest $325 in net operating working capital. By how much did the firm's net income exceed its free cash flow