This website uses cookies to ensure you have the best experience. Learn more

Mini Case Essay

609 words - 3 pages

a. Assuming the expansion was effective Jan. 1, 2010, the 2010 income statement indicates an approximate increase in sales of $2.4M. However, the income statement also indicates a Net Loss in 2010 of ($95K) compared to Net Income of $88K in 2009. Total Assets increased approximately $1.4M. The major drivers causing the increase are fixed assets of $711K, inventory of $572K, and accounts receivable of $280K. Being that assets have to equal liabilities and equity the effect is the same with an approximate increase of $1.4M. Major drivers causing the increase for liabilities and equity are notes payable of $520K and long-term debt of $680K.
b. Computron Industries (CI) had to finance the expansion. The financing activities are what kept them cash positive in 2010. In 2011, CI will need to focus on improving cash flow from the operation of the ...view middle of the document...

d. Computron’s NOPAT is $10,464 ($17,440*1-40%). The operating current assets are cash, inventory, and accounts receivable used in operations. The operating current liabilities are accounts payable and accruals resulting from operations. Computron has $1,317,842 (=7,282+632,160+1,287,360-324,000-284,960) net operating working capital and total net operating capital is the same since Computron does not have any plant or equipment specified in their balance sheet.
e. Computron’s free cash flow is ($513,578) (=10,464-524,042). Since there is a negative free cash flow Computron will not be able to use anything to pay off debt, dividends, buy investments, etc.
f. ROIC = NOPAT/ TOTAL NET OPERATING CAPITAL
NOPAT= EBIT* (1-TAX RATE)
ROIC (2009) =$ 125,460/ $1,138,600 = 11%
ROIC (2010) = $10,464/ $2,257,632 = 0.5%
Computron’s growth has not added value, after the growth the ROIC dropped from 11% in 2009 to 0.5% in 2010. Meaning the investors did not receive the return they wanted in 2010 after the changes have occurred.
g. EVA = NOPAT - (WACC)(CAPITAL)
EVA 2009 = $125,460–(10%)$(1,138,600) = $11,600
EVA 2010 = $10,464-(10%)($2,257,632) = $-215,299

h. MVA = Market Value of Stock – Total Equity
MVA 2009 = $850,000-$663,768= $186,232
MVA 2010 = $600,000-$557,632= $42,368
Between the years of 2009 to 2010 Computron’s market value added (MVA) decreased.
i. Tax Liability = $100,000 (operating income) + $5,000 (Interest income) + $3,000 (Dividend income = $10,000*30%) = $108,000 of taxable income
Used chart on PG. 71 (Chapter 2)
Taxes = $22,250 + 0.39(108,000 - $100000) = $25,370 (Tax Liable)
j. California = 0.07($5,000) - $0 = 350
Exxon = 0.10($5,000) – (.10)($5,000)(.25) = 375
I would choose ExxonMobil because based on the after tax return a $5,000 invest with ExxonMobil will give me a $25 advantage than with the investment into the California bonds. The decision would be indifferent at a 30% marginal tax rate.

Other Papers Like Mini Case

Chapter 3 Mini Case Essay

1424 words - 6 pages A 1 2 B C D E F 3 Chapter 3 Mini Case 4 5 The first part of the case , presented in Chapter 2, discussed Computron Industries’ situation after an expansion 6 program. A large loss occurred in 2010, rather than the expected profit. As a result, its managers, directors, and 7 investors are concerned about the firm’s survival . 8 9 Donna Jamison was brought in as an assistant to Fred Campo, Computron 's chairman, who had the task

Mini Case Study

1108 words - 5 pages Question Capital Budgeting Mini Case Instructions: The assignment is based on the mini case below. The instructions relating to the assignment are at the end of the case. Maria Gonzalez and Bob Saunders are facing an important decision. After having discussed different financial scenarios into the wee hours of the morning, the two computer engineers felt it was time to finalize their cash flow projections and move to the next stage

Ch 22 Mini Case

903 words - 4 pages | Jen Poe | | | | | | | BUS657 Corporate Managerial Finance | | | | | | | | | | | | | Week #5 | | | | | | | Assignment - Chapter 22 Mini - Case | | | | | | | | | | | | | | | | | | | 1)      Calculate BB's current cash conversion cycle. | | | | | | | | | | | | | BB's Ratios: | | | | | | | Average Age of Inventory | $842,020 / [(0.57 *$43,803,000) /365] | | 12.31

Mini Case Homework 1

1410 words - 6 pages Mini Case Assume that you recently graduated and have just reported to work as an investment advisor at the brokerage firm of Balik and Kiefer Inc. One of the firm’s clients is Michelle DellaTorre, a professional tennis player who has just come to the United States from Chile. DellaTorre is a highly ranked tennis player who would like to start a company to produce and market apparel she designs. She also expects to invest substantial amounts of

Fin 516-Mini Case

1796 words - 8 pages MINI – CASE ASSIGNMENT Facebook 1. What is the name of the company? What is the industry sector? Facebook Inc. is a multi-billion dollar company in the Internet informational providers, technology (IT) industry. Facebook Inc. is one of the leading an online social networking service in the world and is continuing to grow as the front-runner in their industry. 2. What are the operating risks of the company? No company with no

Brigham - Chapter 16 - Mini Case

2617 words - 11 pages 11/04/2010 Chapter 16. Mini Case for Working Capital Management Dan Barnes, financial manager of Ski Equipment Inc. (SKI), is excited, but apprehensive. The company's founder recently sold his 51% controlling block of stock to Kent Koren, who is a big fan of EVA (Economic Value Added). EVA is found by taking the net operating profit after-tax (NOPAT) and then subtracting the dollar cost of

Mini Case

1445 words - 6 pages a) Why is corporate finance important to all managers? (1) Corporate finance is important to all managers because it effects decisions being made daily by the company. It allows those to make effective decision with logical financing. It allows those to identify and select the appropriate strategy that will add value to a firm while coming up with strategies to acquire those funds to do so with. b) Describe the organizational forms a

Mini Case

519 words - 3 pages After interviewing the stakeholders of the Leonard Cooper Charter School the following issues was noted: 1. The first issue is with the print server. There are issues with management of print jobs and collisions on the print server. To help solve this problem the company needs to use a full- duplex switched Ethernet network. The Switched Ethernet dramatically improves network performance because each computer will have its own dedicated point-to

Mini Case

715 words - 3 pages Getting started with Adobe® Reader® Adobe Reader is the gold standard for reliably viewing PDF documents on Android™ phones and tablets. Let’s take a look at the ways you can use PDF documents with Adobe Reader. Swipe to the next page to get started! ® I have PDF documents saved in my email and bookmarked in my web browser, plus a whole bunch more in other apps. How do I open them with Adobe Reader? Opening PDF documents with Adobe Reader is

Mini Case - 1592 words

1592 words - 7 pages Solutions Guide:   Please do not present as your own.  I sometimes post solutions that are totally mine, from the book’s solutions manual, or a mix of my work and the books solutions manual. But this is only meant as a solutions guide for you to answer the problem on your own. I recommend doing this with any content you buy online whether from me or from someone else. CASE 13–30 Make or Buy; Utilization of a Constrained Resource [LO1, LO3

Mini Case - 534 words

534 words - 3 pages 1. Why should Lael get involved in reporting if she has not experienced any of the allegations the other employees are making? * With this high amount of employee turnover for the overnight shifts, company performance has been decreasing drastically. Employees for the company have bad perceptions of the ethical culture, which causes more employees to leave the company after short periods of time. If employees feel comfortable at their job

Related Essays

Mini Case Essay 619 Words

619 words - 3 pages Mini Case BUS 401: Principles of Finance Chapter 11 Mini Case A. Due to flows being an item that the firm obtains and can reinvest, Caledonia should concentrate on cash flows verses accounting profits. When cash flows are being evaluated, the firm’s benefits and costs can be reviewed in a better manner. Since firms are more interested in benefits for the shareholders, they are only interested in the cash flows after-tax

Mini Case Essay 1395 Words

1395 words - 6 pages MINI CASE #1 Issue Identified How to account for the expected loss resulted from redemption of the debt obligations in the period that it announces its intent to call the debt for redemption? ASC References ASC 470-50-40-2 states that “ a difference between the reacquisition price of debt and the net carrying amount of the extinguished debt shall be recognized currently in income of the period of extinguishment as losses or gains and

Mini Case Essay 979 Words

979 words - 4 pages ----- Chapter 5 : Basic Stock Valuation :: MINI CASE------------ C) Assume that temp force has a beta coefficient of 1.2, that the risk-free rate (the yield on T-bonds) is 7 percent, and that the market risk premium is 5 percent. What is the required rate of return on the firm’s stock? Using SML to calculate temp force’s required rate of return: rs = rRF + (rM – rRF)bTemp Force = 7% + (12% - 7%)(1.2) = 7% + (5%)(1.2) = 7% + 6

Mini Case Essay 1657 Words

1657 words - 7 pages MINI CASEa. Using the free cash flow valuation model, show the only avenues by which capital structure can affect value.Answer: The basic definitions are:(1) V = Value of Firm(2) FCF = Free Cash Flow(3) WACC = Weighted Average Cost of Capital(4) Rs and Rd are costs of stock and debt(5) We and Wd are percentages of the firm that are financed with stock and debt.The impact of capital structure on value depends upon the effect of debt on: WACC and