Question
In: Accounting
Using the financial statements shown below, calculate net operating working capital(NOWC)
|
|
||||||||
| Chapter Two -- Spreadsheet Assignment | ||||||||
| Using the financial statements shown below, calculate net operating working capital(NOWC), total net operating capital (OC), net operating profit after taxes (NOPAT), operating cash flow (OCF), free cash flow (FCF), and return on invested capital (ROIC). | ||||||||
| Charleston Enterprises: Income Statements for Year Ending December 31 | ||||||||
| (Thousands of Dollars) | 2017 | 2016 | ||||||
| Sales | $1,458,956 | $1,289,560 | ||||||
| Expenses excluding depreciation and amortization | $1,094,217 | $967,170 | ||||||
| EBITDA | $364,739 | $322,390 | ||||||
| Depreciation and amortization | $67,179 | $59,708 | ||||||
| EBIT | $297,560 | $262,682 | ||||||
| Interest Expense | $32,188 | $31,320 | ||||||
| EBT | $265,372 | $231,362 | ||||||
| Taxes (35%) | $92,880 | $80,977 | ||||||
| Net income | $172,492 | $150,385 | ||||||
| Common dividends | $25,874 | $22,558 | ||||||
| Addition to retained earnings | $146,618 | $127,828 | ||||||
| Charleston Enterprises: December 31 Balance Sheets | ||||||||
| (Thousands of Dollars) | ||||||||
| 2017 | 2016 | |||||||
| Assets | ||||||||
| Cash and cash equivalents | $112,980 | $91,950 | ||||||
| Short-term investments | $179,000 | $90,450 | ||||||
| Accounts Receivable | $295,700 | $225,785 | ||||||
| Inventories | $561,820 | $475,790 | ||||||
| Total current assets | $1,049,500 | $803,975 | ||||||
| Net fixed assets | $247,573 | $298,540 | ||||||
| Total assets | $1,397,073 | $1,182,515 | ||||||
| 2017 | 2016 | |||||||
| Liabilities and equity | ||||||||
| Accounts payable | $164,890 | $145,980 | ||||||
| Accruals | $140,503 | $118,136 | ||||||
| Notes payable | $165,500 | $115,850 | ||||||
| Total current liabilities | $470,893 | $299,966 | ||||||
| Long-term debt | $272,473 | $276,670 | ||||||
| Total liabilities | $743,366 | $576,636 | ||||||
| Common Stock | $125,000 | $125,000 | ||||||
| Retained Earnings | $528,707 | $400,879 | ||||||
| Total common equity | $653,707 | $525,879 | ||||||
| Total liabilities and equity | $1,397,073 | $1,182,515 | ||||||
| Key Input Data: | ||||||||
| Tax rate | 35% | |||||||
| WORKZONE BELOW | ||||||||
| Net operating working capital -- NOWC | ||||||||
| 2017 | NOWC = | Operating current assets | - | Operating current liabilities | ||||
| 2017 | NOWC = | $970,500.00 | - | $305,393.00 | ||||
| 2017 | NOWC = | $665,107.00 | ||||||
| 2016 | NOWC = | Operating current assets | - | Operating current liabilities | ||||
| 2016 | NOWC = | $793,525.00 | - | $264,116.00 | ||||
| 2016 | NOWC = | $529,409.00 | ||||||
| Total net operating capital -- OC | ||||||||
| 2017 | OC = | NOWC | + | Net Fixed assets | ||||
| 2017 | OC = | $665,107 | + | $247,573 | ||||
| 2017 | OC = | $912,680.00 | ||||||
| 2016 | OC = | NOWC | + | Net Fixed assets | ||||
| 2016 | OC = | $529,409.00 | + | $298,540.00 | ||||
| 2016 | OC = | $827,949.00 | ||||||
| Net operating profit after taxes | ||||||||
| 2017 | NOPAT = | EBIT | x | ( 1 - Tax rate ) | NOTE: Do NOT type-in the | |||
| 2017 | NOPAT = | $297,560.00 | x | 0.650000 | tax rate -- cell reference! | |||
| 2017 | NOPAT = | $193,414.00 | ||||||
| Operating Cash Flow (OCF) | NOTE: | |||||||
| 2017 | OCF= | NOPAT | + | Depreciation | The OCF equation is on the | |||
| 2017 | OCF= | $193,414.00 | + | $67,179.00 | BLUE concept sheet. | |||
| 2017 | OCF= | $260,593.00 | ||||||
| Free cash flow | ||||||||
| 2017 | FCF = | NOPAT | - | Net investment in operating capital | ||||
| 2017 | FCF = | $193,414.00 | - | $84,731.00 | ||||
| 2017 | FCF = | $108,683.00 | ||||||
| Return on invested capital | ||||||||
| 2017 | ROIC = | NOPAT | / | Total net operating capital -- 2017 OC | ||||
| 2017 | ROIC = | $193,414 | / | $912,680.00 | ||||
| 2017 | ROIC = | 21.1919% | ||||||
| Assume that there were 29 million shares outstanding at the end of the year, the year-end closing stock price was $35.65 per share, and the after-tax cost of capital was 12.5000%. Calculate EVA and MVA for the most recent year. | ||||||||
| Additional Input Data: | ||||||||
| Stock price per share | $35.65 | |||||||
| # of shares (in thousands) | 29,000 | |||||||
| After-tax cost of capital | 12.5000% | |||||||
| Market Value Added | ||||||||
| MVA = | [ Stock Price | x | # of shares ] | - | Total common equity | |||
| $35.65 | x | 29,000 | ||||||
| $1,033,850.00 | - | $653,706.52 | ||||||
| MVA = | $380,143.48 | |||||||
| Economic Value Added | ||||||||
| EVA = | NOPAT | - | [ After-tax cost of capital | x | Operating Capital -- 2017 OC ] | |||
| - | 12.5000% | x | $912,680.00 | |||||
| $193,414 | - | $114,085.00 | ||||||
| EVA = | $79,329.00 | |||||||
Solutions
Expert Solution
| * | Operating current assets = cash + receivables+ inventories | ||||||
| * | Operating current liabilities = Accruals + accounts payable | ||||||
| * | Total net operating capital represents all the current and non-currents assets used by a business in its operations. It includes inventories, accounts receivables,fixed assets,etc | ||||||
| * | |||||||
| * | |||||||
| * | |||||||
| In short oc = Nowc + Fixed assets | |||||||
| NOPAT = OPERATING INCOME * (1- TAX RATE) | |||||||
| OPERATING INCOME = INCOME BEFORE MAKING INTEREST PAYMENTS | |||||||
| WORKZONE BELOW | |||||||
| Net operating working capital -- NOWC | |||||||
| 2017 | NOWC = | Operating current assets | - | Operating current liabilities | |||
| 2017 | NOWC = | $970,500.00 | - | $305,393.00 | |||
| 2017 | NOWC = | $665,107.00 | |||||
| 2016 | NOWC = | Operating current assets | - | Operating current liabilities | |||
| 2016 | NOWC = | $793,525.00 | - | $264,116.00 | |||
| 2016 | NOWC = | $529,409.00 | |||||
| Total net operating capital -- OC | |||||||
| 2017 | OC = | NOWC | + | Net Fixed assets | |||
| 2017 | OC = | $665,107 | + | $247,573 | |||
| 2017 | OC = | $912,680.00 | |||||
| 2016 | OC = | NOWC | + | Net Fixed assets | |||
| 2016 | OC = | $529,409.00 | + | $298,540.00 | |||
| 2016 | OC = | $827,949.00 | |||||
| Net operating profit after taxes | |||||||
| 2017 | NOPAT = | EBIT | x | ( 1 - Tax rate ) | |||
| 2017 | NOPAT = | $297,560.00 | x | (1-0.35) | |||
| 2017 | NOPAT = | $193,414.00 | |||||
| Operating Cash Flow (OCF) | |||||||
| 2017 | OCF= | NOPAT | + | Depreciation | |||
| 2017 | OCF= | $193,414.00 | + | $67,179.00 | |||
| 2017 | OCF= | $260,593.00 | |||||
| Free cash flow | |||||||
| 2017 | FCF = | NOPAT | - | Net investment in operating capital | |||
| 2017 | FCF = | $193,414.00 | - | $84,731.00 | |||
| 2017 | FCF = | $108,683.00 | |||||
| Return on invested capital | |||||||
| 2017 | ROIC = | NOPAT | / | Total net operating capital -- 2017 OC | |||
| 2017 | ROIC = | $193,414 | / | $912,680.00 | |||
| 2017 | ROIC = | 21.19% | |||||
| Assume that there were 29 million shares outstanding at the end of the year, the year-end closing stock price was $35.65 per share, and the after-tax cost of capital was 12.5000%. Calculate EVA and MVA for the most recent year. | |||||||
| Additional Input Data: | |||||||
| Stock price per share | $35.65 | ||||||
| # of shares (in thousands) | 29,000 | ||||||
| After-tax cost of capital | 12.50% | ||||||
| Market Value Added | |||||||
| MVA = | [ Stock Price | x | # of shares ] | - | Total common equity | ||
| $35.65 | x | 29,000 | |||||
| $1,033,850.00 | - | $653,706.52 | |||||
| MVA = | $380,143.48 | ||||||
| Economic Value Added | |||||||
| EVA = | NOPAT | - | [ After-tax cost of capital | x | Operating Capital -- 2017 OC ] | ||
| - | 12.50% | x | $912,680.00 | ||||
| $193,414 | - | $114,085.00 | |||||
| EVA = | $79,329.00 | ||||||
ekkarill92 answered 1 year agoRelated Solutions
PROVIDE EQUATIONS OR FORMULAS a. Using the financial statements shown below, calculate net operating working capital,...
PROVIDE EQUATIONS OR FORMULAS
a. Using the financial statements shown below, calculate net
operating working capital, total net operating capital, net
operating profit after taxes, free cash flow, and return on
invested capital for the most recent year. The federal-plus-state
tax rate is 25%.
Lan & Chen Technologies: Income Statements for
Year Ending December 31
(Millions of Dollars)
2020
2019
Sales
$945,000
$900,000
Expenses excluding depreciation and
amortization
812,700
774,000
EBITDA
$132,300
$126,000
Depreciation and amortization
33,100
31,500
EBIT
$99,200...
Define each of the following terms: Working capital – Net working capital – Net operating working...
Define each of the following terms:
Working capital –
Net working capital –
Net operating working capital –
Explain the following operating current asset investment
policies.
Relaxed policy –
Restricted policy –
Moderate policy –
Using a cost of capital of 13%, calculate the net present value for the project shown...
Using a cost of capital of 13%, calculate the net present value
for the project shown in the following table and indicate whether
it is acceptable, LOADING.... The net present value (NPV) of the
project is $
Initial investment -1,151,000
Year Cash inflows
1 84,000
2 136,000
3 192,000
4 255,000
5 318,000
6 382,000
7 277,000
8 100,000
9 42,000
10 25,000
Using a cost of capital of 11%, calculate the net present value for the project shown...
Using a cost of capital of 11%, calculate the net present
value for the project shown in the following table and indicate
whether it is acceptable,
Initial investment
(CF 0CF0)
negative $−$1149
Year
(t)
Cash inflows
(CF Subscript tCFt)
in thousands
1
$8080
2
$130
3
$189
4
$256
5
$312
6
$376
7
$280
8
$102
9
$42
10
$20
The net present value (NPV) of the project is
$-75,817.60. (Round to the nearest cent.) Is the project
acceptable?
Using a cost of capital of 11%, calculate the net present value for the project shown...
Using a cost of capital of 11%, calculate the net present value
for the project shown in the following table and indicate whether
it is acceptable
Initial investment
(CF 0CF0)
-$1149
Year
(t)
Cash inflows
(CF Subscript tCFt)
in thousands
1
$80
2
$130
3
$189
4
$256
5
$312
6
$376
7
$280
8
$102
9
$42
10
$20
Using a cost of capital of 15%, calculate the net present value for the project shown...
Using a cost of capital of 15%, calculate the net present value
for the project shown in the following table and indicate whether
it is acceptable
Initial investment $-1,145
Year Cash inflows
1 $76
2 $132
3 $185
4 $256
5 $316
6 $383
7 $277
8 $98
9 $43
10 $25
The net present value (NPV) of the project is $_____
Please show all work and what inputs would be in a financial
calculator
Financial ratios: Financial leverage. The financial statements for Tyler Toys, Inc. are shown below. Calculate the...
Financial ratios: Financial leverage. The
financial statements for Tyler Toys, Inc. are shown below.
Calculate the debt ratio, times interest earned ratio, and cash
coverage ratio for 2013 and 2014 for Tyler Toys. Should any of
these ratios or the change in a ratio warrant concern for the
managers of Tyler Toys or the shareholders?
Tyler Toys, Inc.
Income Statement for Years Ending December 31, 2013 and
2014
2014
2013
Revenue
$14,147,996
$13,566,458
Cost of goods sold
$-8,448,120
$-8,131,722
Selling,...
Financial ratios: Financial leverage. The financial statements for Tyler Toys, Inc. are shown below. Calculate the...
Financial ratios: Financial leverage. The
financial statements for Tyler Toys, Inc. are shown below.
Calculate the debt ratio, times interest earned ratio, and cash
coverage ratio for 2013 and 2014 for Tyler Toys. Should any of
these ratios or the change in a ratio warrant concern for the
managers of Tyler Toys or the shareholders?
Tyler Toys, Inc.
Income Statement for Years Ending December 31, 2013 and
2014
2014
2013
Revenue
$14,146,008
$13,566,936
Cost of goods sold
$-8,448,426
$-8,131,134
Selling,...
Use the data below to compute the change in NOWC (Net Operating Working Capital) 2014 2013...
Use the data below to compute the change in NOWC (Net Operating
Working Capital)
2014
2013
Cash
15
16
Short-term investments
10
65
Accounts receivable
369
317
Inventories
551
420
Property, plant & equipment (net)
928
874
Accounts payable
45
35
Short-term debt
99
65
Accrued liabilities
146
132
Long-term debt
658
585
Common stock
130
130
Retained earnings
770
714
Net revenue
3143
2850
Depreciation expense
113
92
Interest
89
63
Taxes
81
85
Net income
252
124
(Round...
Financial ratios: Profitability. The financial statements for Tyler Toys, Inc. are shown below. Calculate the profit...
Financial ratios: Profitability. The financial
statements for Tyler Toys, Inc. are shown below. Calculate the
profit margin, return on assets, and return on equity for 2013
and 2014 for Tyler Toys. Should any of these ratios or the change
in a ratio warrant concern for the managers of Tyler Toys or the
shareholders?
Tyler Toys, Inc.
Income Statement for Years Ending December 31, 2013 and
2014
2014
2013
Revenue
$14,147,036
$13,566,155
Cost of goods sold
$-8,447,557
$-8,131,158
Selling, general, and...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- It is clear that the "displacement" issue poses a serious problem for accurately calculating the economic...
- Paragraph 1-2? Imagine you’re in a supervisory role at a corporation. You have a new, eager...
- Research Friedrich Hayek or The Chicago School of Economics or Austrian Exonomics and compare to Keynes...
- What is the first f element in the 6th period to which Hund's rule must be...
- McArdle Disease (glycogen storage disease 5) is caused by mutations in the phosphorylase enzyme in muscle....
- As reported in the Wall Street Journal in November 2016, the 11 countries that make up...
- 1. Name the eight quantitative tools of quality control that used in a manufacturing process. Could...
ADVERTISEMENT