QUESTION3 Partially correctMark 0.20 out of 1.00 Flag question Edit question Quantify 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 ($ millions). BCS Enterprises Balance Sheet S500 Accounts payable 1,500 Long-term debt 2,500 5,000 Equity $1,500 Accounts receivable Inventory Property, plant & equipment Total assets 3,000 5,000 9,500 Total liabilities and equity $9,500 Actual Forecasted June 2017 June 2018 $6,550 $1,080 7,500 $7,725 Sales NOPAT $1,050 NOA WACC $6,000 7% a. Compute ROPI for FY2017 and FY2018. Net operating assets (NOA) at June 30, 2016 were $6,750 Round answers to one decimal place, if applicable. 2017 2018 ROPI 525$539.3x b. The company is contemplating taking the following actions before the end of June 2017. (These actions 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 596. Decrease property, plant and equipment(PPE) by 20% with no consequent impact on NOPAT 2. 3. Engage in a sale leaseback of a major building. The company will sell 50% of its 4. Increase debt $1,500, which increases interest expense by $75 PPE at book value and increase rental costs by $150 after tax, per year Round answers to one decimal place, if applicable. Action Actual Forecasted June 2017 June 2018 $1,050 1,080 1,330 930 1,080 1,005 NOPAT 7,550 6,725 5,225 6,225 7,500 $ 7,725 NOABeg 525 539.3 801.5 564.3 569.3 609.3 ROPI QUESTION3 Partially correctMark 0.20 out of 1.00 Flag question Edit question Quantify 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 ($ millions). BCS Enterprises Balance Sheet S500 Accounts payable 1,500 Long-term debt 2,500 5,000 Equity $1,500 Accounts receivable Inventory Property, plant & equipment Total assets 3,000 5,000 9,500 Total liabilities and equity $9,500 Actual Forecasted June 2017 June 2018 $6,550 $1,080 7,500 $7,725 Sales NOPAT $1,050 NOA WACC $6,000 7% a. Compute ROPI for FY2017 and FY2018. Net operating assets (NOA) at June 30, 2016 were $6,750 Round answers to one decimal place, if applicable. 2017 2018 ROPI 525$539.3x b. The company is contemplating taking the following actions before the end of June 2017. (These actions 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 596. Decrease property, plant and equipment(PPE) by 20% with no consequent impact on NOPAT 2. 3. Engage in a sale leaseback of a major building. The company will sell 50% of its 4. Increase debt $1,500, which increases interest expense by $75 PPE at book value and increase rental costs by $150 after tax, per year Round answers to one decimal place, if applicable. Action Actual Forecasted June 2017 June 2018 $1,050 1,080 1,330 930 1,080 1,005 NOPAT 7,550 6,725 5,225 6,225 7,500 $ 7,725 NOABeg 525 539.3 801.5 564.3 569.3 609.3 ROPI