Question

eBook FCF Projections Ogier Incorporated currently has $800 million in sales, which are projected to grow by 14% in Year 1 and by 8% in Year 2. Its operating profitability (OP) is 6%, and its capital requirement (CR) is 70%. Do not round intermediate calculations. Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to two decimal places.

What are the projected sales in Years 1 and 2?

What are the projected amounts of net operating profit after taxes (NOPAT) for Years 1 and 2?

What are the projected amounts of total net operating capital (OpCap) for Years 1 and 2?

million What is the projected FCF for Year 2? $

Answer 1

Solution:

1.Calculation of projected sales in Years 1 and 2

Projected sales=Previous Year sales(1+Growth rate)

Projected sales in Years 1=$800(1+0.14)

=$912 million

Projected sales in year 1 is 912

Projected sales in Years 2=$912(1+0.08)

=$984.96 million

Thus,Projected sales in year 2 is 984.96

2.Calculation of projected amounts of net operating profit after taxes (NOPAT) for Years 1 and 2

Since there is no tax rate is given,hence NOPAT is;

=Projected Sales*Operating  profitability

NOPAT for Years 1=$912 million*6%=$54.72 million

Thus,NOPAT for Years 1 is 54.72

NOPAT for Years 2=$984.96 million*6%

=$59.10 million

Thus,NOPAT for Years 2 is 59.10