Cobalt Industries had sales of 153,900 units at a price of $9.82 per unit. It faced fixed operating costs of $259,000 and variable operating costs of $5.18 per unit. The company is subject to a tax rate of 38% and has a weighted average cost of capital of 8.9%. Calculate Cobalt's net operating profits after taxes (NOPAT), and use it to estimate the value of the firm. (Assume the firm's earnings are not growing.)
Cobalt's NOPAT is $ ______. (Round to the nearest dollar.)
The value fo the firm is $________. (Round to the nearest dollar.)
a) Calculation of NOPAT: | |
Particulars | Galaxy |
Sales (153900*9.82) | 1511298 |
Less: variable cost (153900*5.18) | 797202 |
Contribution | 714096 |
Less: Fixed cost | 259000 |
Net operating profit before tax | 455096 |
Less : Tax@38% | 172936.48 |
NOPAT | 282159.52 |
NOPAT is $282160 | |
b) Calculation of value of firm: | |
Value of firm= NOPAT/WACC | |
= 282159.52/0.089=3170331.68 | |
Value of firm is $3170332 |
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