Question

In: Finance

Killmonger Healthcare has forecasted the following EBITs and associated probabilities: $-61 million (15% probability) $33 million...

Killmonger Healthcare has forecasted the following EBITs and associated probabilities:

$-61 million (15% probability)

$33 million (30% probability)

$136 million (55% probability)

Considering that Killmonger has:

8.23 million shares outstanding trading currently trading at $13.69

$64 million in debt (market value)

A 34% tax rate

What is the expected ROIC?

Expert Solution

ROIC (Return On Invested Capital) = Net Operating Profit After Tax / Invested Capital,

Net Operating Profit After Tax = EBIT - Tax ,

Tax Rate = 34% or 0.34,

EBIT = Expected EBIT,

Expected EBIT = Sum of (Each probability X Corresponding EBIT),

Probability	EBIT	Probability X EBIT
0.15	$-61 million	$-9.15 million
0.30	$33 million	$9.90 million
0.55	$136 million	$74.80 million
	Expected EBIT	$75.55 million
	Tax @ 34%	$25.687 million
	Expected NOPAT	$49.863 million
Invested Capital
	Equity	$112.6687 million
	Debt	$64 million
	Total Invested Capital	$176.6687 million
ROIC (Return On Invested Capital)		0.28224014780207300
	in percentage	28.2240147802073000%
	Rounded to 2 decimal	28.22%

There is no hind to find the book value of Debt and Equity, So The ROIC found uot on the basis of market value.

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jeff jeffy answered 2 years ago

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