Calculate Computron’s net operating profit after taxes (NOPAT). Identify the opening current assets. Identify the operating current liabilities. Calculate how much net operating working capital and total net operating capital that Computron has.  Hint: NOPAT = EBIT * (1 - Tax Rate

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Computron's Balance Sheets (Millions of Dollars)    
  2019 2020
Assets    
Cash and equivalents $ 60 $ 50
Short-term investments 100 10
Accounts receivable 400 520
Inventories 620 820
Total current assets $ 1,180 $ 1,400
Gross fixed assets $ 3,900 $ 4,820
Less: Accumulated depreciation 1,000 1,320
Net fixed assets $ 2,900 $ 3,500
Total assets $ 4,080 $ 4,900
     
Liabilities and equity    
Accounts payable $ 300 $ 400
Notes payable 50 250
Accruals 200 240
Total current liabilities $ 550 $ 890
Long-term bonds 800 1,100
Total liabilities $ 1,350 $ 1,990
Common stock 1,000 1,000
Retained earnings 1,730 1,910
Total equity $ 2,730 $ 2,910
Total liabilities and equity $ 4,080 $ 4,900
     
Computron's Income Statement (Millions of Dollars) 2019 2020
Net sales $ 5,500 $ 6,000
Cost of goods sold (Excluding depr. & amort.) 4,300 4,800
Depreciation and amortizationa 290 320
Other operating expenses 350 420
Total operating costs $ 4,940 $ 5,540
Earnings before interest and taxes (EBIT) $ 560 $ 460
Less interest 68 108
Pre-tax earnings $ 492 $ 352
Taxes (25%) 123 88
Net Income $ 369 $ 264
     
Notes:    
a Computron has no amortization charges.    
Computron's Income Statement (Millions of Dollars) 2019 2020
Net sales $ 5,500 $ 6,000
Cost of goods sold (Excluding depr. & amort.) 4,300 4,800
Depreciation and amortizationa 290 320
Other operating expenses 350 420
Total operating costs $ 4,940 $ 5,540
Earnings before interest and taxes (EBIT) $ 560 $ 460
Less interest 68 108
Pre-tax earnings $ 492 $ 352
Taxes (25%) 123 88
Net Income $ 369 $ 264
     
Notes:    
a Computron has no amortization charges.    
Computron's Statement of Cash Flows (Millions of Dollars)
   
    2020
Operating Activities    
Net Income before preferred dividends   $ 264
Noncash adjustments    
Depreciation and amortization   320
Due to changes in working capital    
Change in accounts receivable   (120)
Change in inventories   (200)
Change in accounts payable   100
Change in accruals   40
Net cash provided by operating activities   $ 404
     
Investing activities    
Cash used to acquire fixed assets   $ (920)
Change in short-term investments   90
Net cash provided by investing activities   $ (830)
     
Financing Activities    
Change in notes payable   $ 200
Change in long-term debt   300
Payment of cash dividends   (84)
Net cash provided by financing activities   $ 416
     
Net change in cash and equivalents   $ (10)
Cash and securities at beginning of the year   60
Cash and securities at end of the year   $ 50
     
Table 2A-1        
Individual Tax Table        
If an individual's He/she pays this Plus this percentage Average tax
taxable income amount on the on the excess rate at
is between: base of the bracket over the base top of bracket
(1) (2) (3) (4) (5)
$0 $9,525 $0.00 10.0% 10.0%
$9,525 $38,700 $952.50 12.0% 11.5%
$38,700 $82,500 $4,453.50 22.0% 17.1%
$82,500 $157,500 $14,089.50 24.0% 20.4%
$157,500 $200,000 $32,089.50 32.0% 22.8%
$200,000 $500,000 $45,689.50 35.0% 30.1%
$500,000 and up $150,689.50 37.0% 37.0%
         
Married (Joint Return) Tax Table
       
If a couple's It pays this Plus this percentage Average tax
taxable income amount on the on the excess rate at
is between: base of the bracket over the base top of bracket
(1) (2) (3) (4) (5)
$0 $19,050 $0.00 10.0% 10.0%
$19,050 $77,400 $1,905.00 12.0% 11.5%
$77,400 $165,000 $8,907.00 22.0% 17.1%
$165,000 $315,000 $28,179.00 24.0% 20.4%
$315,000 $400,000 $64,179.00 32.0% 22.8%
$400,000 $600,000 $91,379.00 35.0% 26.9%
$600,000 and up $161,379.00 37.0% 37.0%
  • Calculate Computron’s net operating profit after taxes (NOPAT). Identify the opening current assets. Identify the operating current liabilities. Calculate how much net operating working capital and total net operating capital that Computron has. 
    • Hint: NOPAT = EBIT * (1 - Tax Rate
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