1. Exhibit 10.13 presents historical data for ShipCo, a manufacturer of ships. Based on the data, how has ShipCo performed over the past five years? What is its ROIC for years 2 to 5 (using average invested capital)? What is its oper- ating margin? What is its capital turnover? Is it creating more or less value over time? Assume an operating tax rate of 30 percent and cost of capital of 9 percent. EXHIBIT 10.12 ShipCo: Income Statement and Balance Sheet Smillion Year Year Income statement Revenues Year Yea Year Year 1 2 3 4 5300 556 5 301 661.1 Year Year Year 1 2 106 11.1 12.0 Year 5 13.5 6743 132 Balance sheet Operating cash Excess cash and marketable securities 1344.5( 35 3967) (4396) (451) 1028 1089 111.2 1182 1398 Cost of sales Selling general and administrative Depreciation EBT Interest expense Gain loss on sale (79.5) (863) 187.1) 1926[1079 (15.9 (16.71 (180) (19.81 120.21 901 89.0 992 1091 944 07.5 7.51 175 07.51 051 Accounts receivable Inventory Current assets 79.5 932 992 978 1696 1836 2043 2314 2428 362.5 3843 420.7 48204908 (10.01 Property, plant, and equipment 206.7 2198 2404 2678 2765 Earnings before 826 Equity investments 1800 1800 1800 1800 180.0 Taxes Net Income 715 917 1016 369 12481 (215) 27.5) 305 (261) 578 501 542 71.1 808 Total assets 7492 7842 8411 9098 9503 Dividends 173 170 18.0 178 18.3 Accounts payable Short-temebt Accrued expenses Currentlablities 116.6 119.8 12621355 134.9 45.0 45.0 450 450 450 901 890 93.2 99.2 978 251.7 2537 264.4 2797 2776 Long term debit Common stock Retained amings 1050 1050 1060 1001 1000 100.0 29253255 371.7 1050 1050 100.0 1000 4251 4676 Total liabilities and equity 7492 78429411 9098 9503 2. Using the data presented in Question 1, decompose operating margin and capital turnover. What has been occurring at ShipCo over the five-year period? What might be driving these results? 3. Decompose the ratio of operating working capital to sales for Ship Co into operating-cash days, accounts receivable days, inventory days, accounts- payable days, and accrued-expenses days. (For comparability, use sales in all calculations. Compare these results with those in Exhibit 10.14 for DefenseCo, a large diversified defense contractor. Which firm is showing a better trend in its management of its working capital? What might explain the differences in these variables