• Consider that you have been brought in as an assistant to Jenny Cochran, a graduate with four years of experience as an equities analyst. Cochran currently assists the chairman of the board of Computron Industries, a manufacturer of computer components. During the previous year, Computron had doubled its plan 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 the financial statements and other data that is shown in the Mini Case tab in the Chapter 2 Tool KitLinks to an external site.. Download the Mini Case worksheet as an Excel file, or make a copy of the Google sheet and share it with editing rights with your instructor. As Cochran’s assistant, she has asked you to help answer the following questions: In a paragraph or two, explain the effect the expansion had on sales and net income. What effect did the expansion have on the asset side of the balance sheet? What effect did the expansion have on the liabilities and equity? In a paragraph or two, explain what you conclude from the statement of cash flows. In a paragraph or two, explain free cash flow (FCF) and why it is important. What are FCF five uses? Calculate Computron’s net operating profit after taxes (NOPAT). Identify the opening current assets. Identify the operating current liabilities. Calculate how much net operating working capital and total net operating capital that Computron has. Hint: NOPAT = EBIT * (1 - Tax Rate) Calculate Computron’s free cash flow. Identify what you think are Computron’s “net Uses” of its FCF. Hint: FCF = NOPAT - Net investment in capital from previous to current year. Calculate Computron’s return on invested capital (ROIC). Computron has a 10% cost of capital (WACC). Explain whether you think the decline in the ROIC was due to operating profitability or capital utilization. Explain whether you think Computron’s growth added value. Hint: ROIC = NOPAT / Total Net Operating Capital