Simplified Income Statement:
Sales: 1000
Variable Costs: 200 Fixed Costs: 300
Interest Income: 50 Interest Expense: 100
Taxes: 180
Net Income: 270
My question is, when determining operating cash flows using NOPAT (NOPAT+dep-^NWC-Capex), how would you calculate NOPAT.
Would you use: Sales: 1000 -VC: 200
-FC: 300
NOP: 500
-Taxes (500x40%): 200
NOPAT: 300
OR would you use the 180 for taxes from the income statement (which includes interest income and expense)?
Does this make any sense? lol Thanks for any input
The first way. NOPAT = EBIT * (1-tax)
Also, free cash flow is NOPAT + dep - change in NWC - CAPEX, not operating cash flow.
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