Advanced Fin man- Free Cash Flow

Free cash flow

cash flow available for distribution to all the company’s investors after teh company has made all investments necessary to sustain ongoing operations

pay interest, repay debt, pay dividends, repurchase stock, purchase non-operating assets, increase in cash

uses of free cash flow

EBIT x (1-t)

NOPAT equation

Net operating profit after tax

the amount of profit the company would generate if it had no debt and held no financial assets

NOPAT - total operating capital

free cash flow with nopat equation

notes payable + long term bonds + preferred stock + common equity

total investor supplied capital equation

NOPAT/ operating capital

Return on invested capital equation

Greater

To produce a greater than or equal to WACC ROIC should be ________ than NPV + WACC

income statement

NOPAT comes from which financial statement

balance sheet

operating capital comes from which financial statement

market value added

measures the cumulative value added since the inception of the firm

economic value added

measures the value added in a given year and the dollars a firm makes above and beyond the minimum dollars required by investors

NOPAT - operating capital x WACC

EVA equation

MVA equation description

the difference between the market value of the firm’s stock and the cumulative total equity capital that has been supplied by shareholders

market cpaitalization - total common equity

MVA equation

total market value of the firm - total investor supplied capital

MVA equation alternate