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Assume that 1% of sales is needed as cash, and that the firm's wacc is 20% in perpetuity.
1. What is the NOPLAT in 2009?
2. What is the Invested Capital (IC) in 2009?
3. What is the return on invested capital (ROIC) in 2009?
4. What is the free cash flow (FCF) in 2009?
5. If 2009 ROIC remains unchanged and NOPLAT in 2010 is expected to be as in 2009 and to grow 5% per year in
perpetuity, what is the continuation value of the firm at the end of 2009?(include only the operating part.)
2008 2009
Sales 1,000 1,200
Costs 500 600
Depreciation 200 250
Operating Income (before
Interest and Taxes) 300 350
Interest Expense 100 110
Nonoperating Income
(expense) 20 25
Special Items - 30
Pretax Income 220 295
Income Taxes* 58 88
Net Income 162 207
A. tax rate 0.26 0.30
2008 2009
Cash and Short-term
Investments 2,100 2,400
cash 1,100 1,200
Short-term Investments 1,000 1,200
Receivables (Trade) 250 400
Inventories 200 150
Current Assets 2,550 2,950
Net Fixed Assets 2,000 2,100
Total Assts 4,550 5,050
2008 2009
Sales 1,000 1,200
Costs 500 600
Depreciation 200 250
Operating Income Before Interest Taxes
and Amortization (EBITA) 300 350
Taxes on EBITA 90 110
NOPLAT 210 240
Taxes on EBITA
Income Taxes 58 88
Tax Shield on Interest Expense 40 44
Taxes on Special Items - (12)
Taxes on non-operaing income (8) (10)
Taxes on Operating Income 90 110
Extra:
NOPLAT/sales 0.18 0.20
Answer 2
2008 2009
Total Current Assets 2,550 2,950
Minus cash and Short-Term
Investments (2,100) (2,400)
Minus Noninterst Bearing Current
Liabilities (150) (200)
Add allocation for cash (1% of
sales) 10 12
Operating Net Working Capital 310 362
Net Fixed Assets 2,000 2,100
Operating Invested Capital (IC) 2,310 2,462
Extra:
Change in IC 152
Inestment in Excess of Depr. 152
Invested Capital/sales 2.31 2.05
Inv. In Excess of Depr./NOPLAT 0.633
Answer 3
ROIC a 0.10
Answer 4
2009
NOPLAT 240
Depreciation 250
Gross Operating Cash Flow 490
Increses in NWC 52
Net Capital Spending 350
Gross Investment (Capex) 402
Free Cash Flow 88
NOPLAT 240
Investment in excess of depr. 152
FCF 88
Answer 5