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Reconcile a simplified period
The fictional cash margin is 200, deductible depreciation 100 and immediately applied tax fraction 25%. After-tax operating earnings are 75. Adding back the noncash charge gives operating cash flow 175 under these assumptions.
Add separately dated movements
| Item | Role in the model |
|---|---|
| NOPAT 75 | After-tax operating earnings |
| Depreciation 100 | Noncash charge in the stated earnings model |
| Operating cash flow 175 | Reconciled operating amount |
| Equipment purchase | Separate asset outflow |
| Additional working capital | Separate operating balance investment |
Check whether the assumed tax effect is available
The algebra assumes the deduction changes current cash tax at the stated rate. If a benefit is deferred or tax depreciation differs, the cash amount needs another schedule. The illustration does not establish actual tax treatment.
Keep earnings metrics and project schedules distinct
A ROIC numerator can use NOPAT under a defined capital convention. An NPV schedule needs the dated net cash flows of the chosen boundary. Substituting the same earnings number for every purpose conceals those differences.