New England College of Business and Finance Computrons Statement Questionnaire

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User Generated

User

znyq

Subject

Computer Science

Description

'Jenny Cochran, a graduate of The University of Tennessee with 4 years of experience as an equities analyst, was recently brought in as assistant to the chairman of the board of Computron Industries, a manufacturer of computer components.

During the previous year, Computron had doubled its plant capacity, opened new sales offices outside its home territory, and launched an expensive advertising campaign. Cochran was assigned to evaluate the impact of the changes. She began by gathering financial statements and other data. (Data Attached)

What effect did the expansion have on sales and net income? What effect did the expansion have on the asset side of the balance sheet? What do you conclude from the statement of cash flows?
What is Computron’s net operating profit after taxes (NOPAT)? What are operating current assets? What are operating current liabilities? How much net operating working capital and total net operating capital does Computron have?
What is Computron’s free cash flow (FCF)? What are Computron’s “net uses” of its FCF?
Calculate Computron’s return on invested capital (ROIC). Computron has a 10% cost of capital (WACC). What caused the decline in the ROIC? Was it due to operating profitability or capital utilization? Do you think Computron’s growth added value?
What is Computron's EVA? The cost of capital was 10% in both years.
Assume that a corporation has $200,000 of taxable income from operations. What is the company's federal tax liability?
Assume that you are in the 25% marginal tax bracket and that you have $50,000 to invest. You have narrowed your investment choices down to municipal bonds yielding 7% or equally risky corporate bonds with a yield of 10%. Which one should you choose and why? At what marginal tax rate would you be indifferent?

Submit your answers in a Word and/or Excel document.

Unformatted Attachment Preview

Computron's Income Statement 2019 INCOME STATEMENT Net sales Cost of Goods Sold (Except depr. and amort.) Other Expenses Depreciation and amortization Total Operating Costs Earnings before interest and taxes (EBIT) Less interest Pre-tax earnings Taxes (40%) Net Income Dividends Tax rate $ $ $ $ $ $ $ $ $ $ $ 2,059,200 1,718,400 204,000 11,340 1,933,740 125,460 37,500 87,960 35,184 52,776 13,200 40% Computron's Balance Sheets 2019 Assets Cash and equivalents Short-term investments Accounts receivable Inventories Total current assets Gross fixed assets Less: Accumulated depreciation Net plant and equipment Total assets $ $ $ $ $ $ $ $ $ 5,400 29,160 210,720 429,120 674,400 294,600 87,720 206,880 881,280 Liabilities and equity Accounts payable Notes payable Accruals Total current liabilities Long-term bonds Common Stock Retained Earnings Total Equity Total Liabilites and Equity $ $ $ $ $ $ $ $ $ 87,360 120,000 81,600 288,960 194,059 276,000 122,261 398,261 881,280 Computron's Statement of Cash Flows Operating Activities Net Income before preferred dividends Noncash adjustments Depreciation and amortization Due to changes in working capital Change in accounts receivable Change in inventories Change in accounts payable Change in accruals Net cash provided by operating activities Investing activities Cash used to acquire fixed assets Change in short-term investments Net cash provided by investing activities Financing Activities Change in notes payable Change in long-term debt Payment of cash dividends Net cash provided by financing activities Net change in cash and equivilents Cash and securities at beginning of the year Cash and securities at end of the year Corporate Tax Rates If a corporation's taxable income is between: (1) (2) $0 $50,000 $50,000 $75,000 $75,000 $100,000 $100,000 $335,000 $335,000 $10,000,000 $10,000,000 $15,000,000 $15,000,000 $18,333,333 $18,333,333 and up It pays this amount on the base of the bracket: (3) $0 $7,500 $13,750 $22,250 $113,900 $3,400,000 $5,150,000 $6,416,667 Plus this percentage on the excess over the base (4) 15.0% 25.0% 34.0% 39.0% 34.0% 35.0% 38.0% 35.0% 2020 $ $ $ $ $ $ $ $ $ $ 3,500,640 2,988,000 432,000 70,176 3,490,176 10,464 105,600 (95,136) (38,054) (57,082) $ 6,600 40% 2020 $ $ $ $ $ $ $ $ $ 4,369 12,000 379,296 772,416 1,168,081 721,770 157,896 563,874 1,731,955 $ $ $ $ $ $ $ $ $ 194,400 432,000 170,976 797,376 600,000 276,000 58,579 334,579 1,731,955 2020 $ (57,081.60) $ 70,176.00 $ $ $ $ (168,576.00) (343,296.00) 107,040.00 89,376.00 $ (302,361.60) $ $ $ (427,170.00) 17,160.00 (410,010.00) $ $ $ $ 312,000.00 405,940.80 (6,600.00) 711,340.80 $ $ $ (1,030.80) 5,400.00 4,369.20
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Tags: Computron Industries Computrons return on invested capital Computrons net operating profit after taxes effect did the expansion have on sales Computrons free cash flow

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Explanation & Answer

Please view explanation and answer below.

1

Student’s name

Instructor

Course

Date

Computer Science

2

1. What effect did the expansion have on sales and net income? What effect did the
expansion have on the asset side of the balance sheet? What do you conclude from the
statement of cash flows?
The expansion by Computron’s resulted in increase in volume of Net sales to USD
3500640 from USD 2059600 the preceding year. This translated into a 70% increase. On
the assets side, the resulting outcome from the expansion was an increase in the total
assets of the company.

Cash and equivalents and short term investments registered a drop but the to...