Stellar Division financial results for FY2018 The 2018 financial results of the Stellar Division are given to the right. The balance sheet data represents beginning of the period values. Below you are asked to calculate the ROl's under various altermative scenarios. Treat each scenario separately and do not carry forward assumptions unless instructed to do so. The scenarios are: 1. As reported. 2. As reported but with the tax rate reduced to 21%. 3. Incorporate changes resulting from the retirement of $10 million in long-term debt using cash on hand. Assume the debt is retired at the beginning of 2018 4. Stellar invests $8 million in a new project. The project is financed with new long-term debt with a 5% interest rate. During 2018, the project returned $1,300,000 in revenues, incurred cash expenses of $200,000, and had depreciation charges of $500,000 5. Same facts as in 4, above, but a change in the tax laws allows $1,000,000 of depreciation in the new investment to be deducted on the tax return. This does not change the project's before tax income on the financial reports. It may, however, impact the amount of taxes owed on the project's 2018 income Show all ROI calculations to 3 significant digits. Sales Revenue Cost of Goods Sold Operating Expenses Interest Expense Total Expenses Income before taxes Income Taxes Net Income Total Assets Total Current Liabilities Non Interest-bearing Current Liabilities Long-term debt (5% interest rate) Cost of capital $43,000,000 $24,400,000 9,600,000 $1,100,000 $35,100,000 7,900,000 S3,160,000 $4,740,000 $89,000,000 S3,200,000 $700,000 $ 19,500,000 6.50% Answers Calculate the ROI for the Stellar Division using the formula ROI- NOPAT divided by Invested Capital. Use the beginning of the period value for Invested Capital this number may vary from one scenario to another Recalculate the ROI assuming the tax rate falls to 21% (Scenario 2) Recalculate the ROI assuming retirement of debt (Scenario 3) Calculate the ROI for the new project only (Scenario 4). Treat any interest expense as a non-operating charge and base your calculation on the beginning value of the asset Recalculate the ROl for the new project (Scenario 5) as described in 4, above, with the further assumption that accelerated depreciation is allowed on the tax return for the purposes of calculating the taxes owed in 2018