Question

Please use financial statement information for Fin 602 Corp below for question 2) to 5).

Income statement (million dollars)

	2019	2018
Sales	2400	1000
Operating costs excluding depreciation	2000	850
Depreciation	270	25
Earnings before interest and taxes	130	125
Less interest	110	20.2
Earnings before tax	20	104.8
Tax (21%)	4.2	22
Net Income available to common stockholders	15.8	82.8
Common dividend	4.0	4.4

Balance sheet (million dollars)

	2019	2018
Cash and equivalents	12	10
Short term investments	23	20
Account receivable	350	150
Inventories	300	200
Total current assets	685	380
Net plant and equipment	2173.5	250
Total assets	2858.5	630
Accounts payable	108	90
Notes payable	90	71.5
Accruals	72	60
Total current liabilities	270	221.5
Long term debts	2330	150
Total liabilities	2600	371.5
Common stock (50 million shares)	50	50
Retained earnings	208.5	208.5
Common equity	258.5	258.5
Total liabilities and equity	2858.5	630

2. Calculate NOPAT (net operating profit after tax) of the year 2019 and 2018 (10 points)

3. Calculate the amount of total (net) operating capital for both year – 2019 and 2018 (10 points)

4. Calculate the free cash flow for the year of 2019 (20 points)

5. What are ROIC (Return on capital invested) for 2019 and 2018 (10 points)

6.  Basing on answers in 2) to 5), does Fin 602 look good in 2019? If not good, what looks like happening in operation and finance? (10 points)

Answer 1

2)

a)Net operating profit after taxes for the year 2019

Net operating profit is the company's operating profit before interest and tax. It shows the earnings that the company would have earned if there is no interest expense.

Net operating profit after tax =EBIT*(1 - Tax rate)

Earnings before interest and taxes =$130

EBIT =$130

Tax rate =21%

=$130*(1-.21)

  =$102.7

b)Net operating profit after taxes for the year 2018

Net operating profit after tax =EBIT*(1 - Tax rate)

Earnings before interest and taxes =$125

EBIT =$125

Tax rate =21%

=$125*(1-.21)

  =$98.75