Answer:
$625
Explanation:
Given that,
In 2007,
Net income = $600;
After-tax operating income [EBIT (1-T)] = $700;
Total assets = $2,000
In 2008,
Net income = $825;
After-tax operating income [EBIT (1-T)] = $1,125
Total assets = $2,500
Net capital investment = Total assets for 2008 - Total assets for 2007
= $2,500 - $2,000
= $500
Free Cash Flow during 2008 = After-tax operating income for 2008 - Net capital investment
Free cash flow during 2008 = $1,125 - $500
= $625
