Ashford University Firm with Manufacturing Facilities Accounting Question

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Business Finance

ashford university

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I need a solution to this question, just a short calculation. Do it in word. My friend has told me the answers are online in chegg and course hero. I have also attached sample solutions. Be quick and very accurate. I only have 2 hours, but I know it will not take you 30 minutes

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Question Question #3 (25 marks) A firm with manufacturing facilities is currently running at 40% capacity. Its B/S is summarized as follows (in millions of dollars): A/R 2 Inventory 8 Plant assets 22 Financial liabilities 8 Common equity 24 The firm is generating sales of $64.0 million from its current production, earning an after-tax operating profit margin of 7.5%. [NOPAT/Sales = 7.5%] Required: a Calculate the firm’s return on net operating assets, RNOA = NOPAT/NOA, it’s A/R turnover, its INV turnover = Sales/Inventory, its turnover on plant assets = Sales/Plant assets, its total assets turnover = Sales/Total assets. (6 marks). b. The firm has a required rate of return of 10% for its operations [WACC = 10%]. Value the firm (its core operations) using the formula: Value of the firm = NOA + {RNOA-WACC}*NOA/WACC where NOA its net operating assets (4 marks) c. Suppose the firm were to sell at 80% capacity of its plant with no change in selling prices or profit margins (and so earned revenues of $64*2=$128 million). A/R and Inventory would increase to maintain the same A/R and Inventory turnovers as before. Calculate the value of the firm. (6 marks) Identify the aspects of the operations that have increased the value of the firm over that calculated in (b). (3 marks) d. Repeat the calculations in (c.) if the firm were to sell products at 100%. (6 marks)
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Explanation & Answer

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Question
a RNOA = NOPAT/NOA,
NOPAT=64000000×7.5
=$480000000
NOA= (22+8)-8
=22
RNOA= 480000000/22000000
=2.18
RNOA= 22×2.18
=$47.96million

INV turnover = Sales/Inventory,
INV =64000000/8...


Anonymous
Excellent resource! Really helped me get the gist of things.

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