Dilli Bista, MBA is the financial manager for Computron Inc. a large public corporation specializing in software manufac
Posted: Tue Jan 18, 2022 12:58 pm
Dilli Bista, MBA is the financial manager for Computron Inc. a
large public corporation specializing in software manufacturing.
The company designs and develops software programs that allow users
to create their own documents, apps, animations, and other media
content. Despite a huge investment made last three years in fixed
assets, the company’s sales revenue and profit margins have
decreased over the years because of the Covid-19 pandemic and
complaints of some parents about the effect of video games on their
kids’ social life and academic performance. Dilli is analyzing the
company’s financial statements and annual reports to determine the
financial performance of the company for the year and see how the
performance can be improved.
Dilli noticed that last year the company had $4 million in
operating income (EBIT). The company had a depreciation expense of
$1 million and an interest expense of $1 million. The company’s tax
rate is 25%. The company has $14 million in operating current
assets and $4 million in operating current liabilities and has $15
million in net plant and equipment. The company has after-tax cost
of capital of 10%.
1. List four types of financial
statements that the company’s annual report typically include.
State three items that can be found in each of the
financial statement of Computron Inc.
2. Determine Computron’s net income for the year. Show your
calculations.
3. What was Computron’s net cash flow?
4. What was Computron’s net operating profit after taxes
(NOPAT)?
5. Calculate net operating working capital and total net
operating capital for the year.
6. Calculate Computron’s free cash flow for the year if net
operating capital in the previous year was $24 million.
7. Explain to the chairman of the board five uses of free cash
flow that can help maximize the value of the firm.
8. Explain Economic Value Added (EVA) and compute Computron’s
EVA if total net operating capital is $25 million? The company’s
after-tax cost of capital is 10.0%.
9. Compute and explain market value added (MVA) for
Computron using the following information:
i. total number of shares outstanding is 2 million
ii. current stock price is $35 per share
iii. total common equity is $68.2 million
10. Calculate the company’s return on invested capital (ROIC).
Do you think Computron’s growth added value?
large public corporation specializing in software manufacturing.
The company designs and develops software programs that allow users
to create their own documents, apps, animations, and other media
content. Despite a huge investment made last three years in fixed
assets, the company’s sales revenue and profit margins have
decreased over the years because of the Covid-19 pandemic and
complaints of some parents about the effect of video games on their
kids’ social life and academic performance. Dilli is analyzing the
company’s financial statements and annual reports to determine the
financial performance of the company for the year and see how the
performance can be improved.
Dilli noticed that last year the company had $4 million in
operating income (EBIT). The company had a depreciation expense of
$1 million and an interest expense of $1 million. The company’s tax
rate is 25%. The company has $14 million in operating current
assets and $4 million in operating current liabilities and has $15
million in net plant and equipment. The company has after-tax cost
of capital of 10%.
1. List four types of financial
statements that the company’s annual report typically include.
State three items that can be found in each of the
financial statement of Computron Inc.
2. Determine Computron’s net income for the year. Show your
calculations.
3. What was Computron’s net cash flow?
4. What was Computron’s net operating profit after taxes
(NOPAT)?
5. Calculate net operating working capital and total net
operating capital for the year.
6. Calculate Computron’s free cash flow for the year if net
operating capital in the previous year was $24 million.
7. Explain to the chairman of the board five uses of free cash
flow that can help maximize the value of the firm.
8. Explain Economic Value Added (EVA) and compute Computron’s
EVA if total net operating capital is $25 million? The company’s
after-tax cost of capital is 10.0%.
9. Compute and explain market value added (MVA) for
Computron using the following information:
i. total number of shares outstanding is 2 million
ii. current stock price is $35 per share
iii. total common equity is $68.2 million
10. Calculate the company’s return on invested capital (ROIC).
Do you think Computron’s growth added value?