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 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.
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.
You are an industry analyst for the telecom sector. You are analyzing financial reports from two companies: TT&T Inc. and Phonez Corp. 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 TT&T Inc. EBIT $105,000 Depreciation $42,000 Total operating capital $617,400 Net investment in operating capital $294,000 WACC 8.84% Phonez Corp. $74,760 $29,904 $481,740 $155,400 11.50% In your analysis, you want to look for several characteristics--one of them being the return on invested capital (ROIC). Using the information available, complete the following statements: TT&T Inc. has a higher free cash flow than Phonez Corp. does. The net operating profit after tax (NOPAT) for TT&T Inc. is , whereas the NOPAT for Phonez Corp. is TT&T Inc. has a return on invested capital of , whereas, Phonez Corp. has a return on invested capital of
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