During the previous year, Computron had doubled its plant capacity, opened new sales offices outside its home territory, and launched an expensive advertising campaign. Cochran was assigned to evaluate the impact of the changes. She began by gathering financial statements and other data. (Data Attached)
What effect did the expansion have on sales and net income? What effect did the expansion have on the asset side of the balance sheet? What do you conclude from the statement of cash flows?
What is Computron’s net operating profit after taxes (NOPAT)? What are operating current assets? What are operating current liabilities? How much net operating working capital and total net operating capital does Computron have?
What is Computron’s free cash flow (FCF)? What are Computron’s “net uses” of its FCF?
Calculate Computron’s return on invested capital (ROIC). Computron has a 10% cost of capital (WACC). What caused the decline in the ROIC? Was it due to operating profitability or capital utilization? Do you think Computron’s growth added value?
What is Computron's EVA? The cost of capital was 10% in both years.
What happened to Computron's market value added (MVA)?
Assume that a corporation has $200,000 of taxable income from operations. What is the company's federal tax liability?
Assume that you are in the 25% marginal tax bracket and that you have $50,000 to invest. You have narrowed your investment choices down to municipal bonds yielding 7% or equally risky corporate bonds with a yield of 10%. Which one should you choose and why? At what marginal tax rate would you be indifferent?
Question1: https://docs.google.com/spreadsheets/d/1Ni1Sng671CzdMO29s298sCcICEHT4GwqJWuLuPlYoK0/edit?usp=sharing
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