Please show work for part b), #4 "Increase debt $300, which increases interest expense by $15." I got part a.) and part b.) # 1-3 correct on this problem except for this last number. i thought you subtract $300 from NOA(beginning) = $1,500 (for Forecasted June 2018) to get $1,200 but apparently that is not the correct answer. Wacc is assumed to be 7%. What is both the new NOA and the new ROPI for Action 4?
Managin | Managiri Follow X Module X D * C istimatin. OBARATON ader DC LOCRADLADDSDL come-Based Valuation.pdf - Adobe A 5 Help Innovation-M... sm ch5 let Module 14 - Chapter 5 - C... Financial Stat.. X E14-25, Ouantify the Effects of Managerial Actions on ROPI and Components BCS Enterprises reports the following financial data just prior to its fiscal year ended June 30, 2017 (5 millions). BCS ENTERPRISES Balance Sheet $ 100 Accounts payable... Cash ..... $ 300 300 Long-term debt. Accounts receivable..... 600 Inventory................ 500 Property, plant & equipment....... 1.000 Equity ... Total assets... .. $1,900 Total liabilities and equity ......... $1,900 7.000 Actual June 2017 Forecasted June 2018 Sales. NOPAT. $1,200 $1,310 $ 210 $ 216 $1,500 $1,545 7% NOA WACC. Required a.Compute ROPI for FY2017 and FY2018. Net operating assets (NOA) at June 30, 2016, were $1.350. b. The company is contemplating taking the following actions before the end of June 2017. (These ac- tions are not reflected in any of the financial data reported above.) For each of the actions, determine the effect on residual operating income for the fiscal year ended June 30, 2018. 1. Reduce inventory by 10%, which reduces accounts payable by 5%. 2. Decrease property, plant and equipment (PPE) by 20% with no consequent impact on NOPAT. 3. Engage in a sale leaseback of a major building. The company will sell 50% of its PPE at book value and increase rental costs by $30 after tax, per year. 4. Increase debt $300, which increases interest expense by SIS. search Managin | Managiri Follow X Module X D * C istimatin. OBARATON ader DC LOCRADLADDSDL come-Based Valuation.pdf - Adobe A 5 Help Innovation-M... sm ch5 let Module 14 - Chapter 5 - C... Financial Stat.. X E14-25, Ouantify the Effects of Managerial Actions on ROPI and Components BCS Enterprises reports the following financial data just prior to its fiscal year ended June 30, 2017 (5 millions). BCS ENTERPRISES Balance Sheet $ 100 Accounts payable... Cash ..... $ 300 300 Long-term debt. Accounts receivable..... 600 Inventory................ 500 Property, plant & equipment....... 1.000 Equity ... Total assets... .. $1,900 Total liabilities and equity ......... $1,900 7.000 Actual June 2017 Forecasted June 2018 Sales. NOPAT. $1,200 $1,310 $ 210 $ 216 $1,500 $1,545 7% NOA WACC. Required a.Compute ROPI for FY2017 and FY2018. Net operating assets (NOA) at June 30, 2016, were $1.350. b. The company is contemplating taking the following actions before the end of June 2017. (These ac- tions are not reflected in any of the financial data reported above.) For each of the actions, determine the effect on residual operating income for the fiscal year ended June 30, 2018. 1. Reduce inventory by 10%, which reduces accounts payable by 5%. 2. Decrease property, plant and equipment (PPE) by 20% with no consequent impact on NOPAT. 3. Engage in a sale leaseback of a major building. The company will sell 50% of its PPE at book value and increase rental costs by $30 after tax, per year. 4. Increase debt $300, which increases interest expense by SIS. search
