Net investment in operating capital is Rs 5000 and net operating profit after taxes is Rs 8000 then free cash flow would be

Rs 13,000.00
-Rs 3,000.00
Rs 3,000.00
-Rs 13,000.00

The correct answer is A. Rs 13,000.00.

Free cash flow is the cash flow available for a company to use for investment or distribution to its owners after taking into account all operating expenses, capital expenditures, and working capital requirements.

Net investment in operating capital is the amount of money a company needs to invest in its operating activities in order to maintain its current level of operations. This includes the purchase of new equipment, inventory, and accounts receivable.

Net operating profit after taxes (NOPAT) is a measure of a company’s profitability after taking into account taxes. It is calculated by taking a company’s net operating profit (NOI) and subtracting taxes.

To calculate free cash flow, we can use the following formula:

Free cash flow = NOPAT + Depreciation and amortization – Net investment in operating capital

In this case, we are given that NOPAT = Rs 8000, Depreciation and amortization = Rs 2000, and Net investment in operating capital = Rs 5000. Substituting these values into the formula, we get:

Free cash flow = Rs 8000 + Rs 2000 – Rs 5000 = Rs 13,000.00

Therefore, the free cash flow for this company is Rs 13,000.00.

Option B is incorrect because it is the net investment in operating capital, not the free cash flow.

Option C is incorrect because it is the net operating profit after taxes, not the free cash flow.

Option D is incorrect because it is the negative of the free cash flow.

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