ROIC, an average base and operating cash flow

Reconcile the fictional period

Cash receipts less operating cash costs are 200, deductible depreciation is 100 and the example assumes an immediately usable 25% tax effect. Operating profit is 100, modeled tax is 25 and NOPAT is 75. Adding back the noncash charge gives operating cash flow 175 under those assumptions.

State the selected balance convention

Beginning operating capital is 500 and ending operating capital 700. The case uses the simple two-point average (500 + 700)/2 = 600. This is a declared convention, not proof that a detailed time-weighted average would also equal 600.

Keep the two numerators distinct

Do not turn either ratio into a new-project NPV

The operating cash-flow amount does not yet deduct a new asset purchase or additional working-capital funding. The ratios concern the stated historical-period quantities. A new proposal needs its own dated incremental schedule and valuation assumptions.