QUESTION:

CALCULATE THE FREE CASH FLOW FOR 2018.

Find the total net operating capital (TNOC) for 2018 and 2017, respectively.

ABC Inc. Dec. 31st Balance Sheets ($M)
	2018	2017
Cash	200	240
Marketable securities (Short-term Investments)	0	160
Accounts receivable	2,000	1,520
Inventories	4,000	3,280
Total current assets	6,200	5,200
Net plant and equipment	8,000	6,800
Total Assets	14,200	12,000
Accounts payable	800	760
Notes payable	1,120	520
Accruals	1,200	1,120
Total current liabilities	3,120	2,400
Lon-term bonds	4,800	4,000
Total liabilities	7,920	6,400
Preferred stock	400	400
Common stock	2,000	2,000
Retained earnings	3,880	3,200
Total common equity	5,880	5,200
Total liabilities and equity	14,200	12,000

ABC Inc. Dec. 31st Income Statement ($M)
	2018	2017
Net sales	20,000	19,040
Costs of goods sold	15,200	14,240
Depreciation	800	680
Other operating expenses	2,000	1,920
Earnings before interest and taxes (EBIT)	2,000	2,200
Less interest	480	400
Earnings before taxes	1,520	1,800
Taxes (40%)	608	720
Net Income	912	1080
Preferred dividends	32	32
Net income available to common stock holders	880	1,048
Additional information
Stock price per share ($)	108	192
Number of preferred shares	4,000,000	4,000,000
Number of common shares	200,000,000	200,000,000
Common dividends ($M)	200	192
Weighted average cost of capital (WACC)	10%