Practice Exercise on Lecture 3

Practice Exercise on Lecture 3 - b. What was the companys...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Practice Exercise on Lecture 3 ST- 1: Net Income, Cash Flow and EVA Last year Cole Furnaces had $5,000,000 in operating income (EBIT). The company had a net depreciation expense of $1,000,000 and an interest expense of $1,000,000; its corporate tax rate was 40%. The company has $14,000,000 in operating current assets and $4,000,000 in operating current liabilities; it has $15,000,000 in net plant and equipment. It estimates that it has an after-tax cost of capital of 10%. Assume that Cole’s only non-cash item was depreciation. a. What was the company’s net income for the year?
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: b. What was the companys net cash flow? c. What was the companys net operating profit after taxes (NOPAT)? NOPAT = EBIT(1-T) = 5,000,000(1-0.4) = $3,000,000 d. Calculate net operating working capital and total net operating capital for the current year. NOWC = 14,000,000 4,000,000 = $10,000,000 TNOC = NOWC + fixed assets = 10,000,000 + 15,000,000 = $25,000,000 e. If total net operating capital in the previous year was $24,000,000, what was the companys free cash flow (FCF) for the year? f. What was the companys Economic Value Added (EVA)?...
View Full Document

This note was uploaded on 06/04/2010 for the course FINANCE 534 taught by Professor Hi during the Spring '10 term at Punjab Engineering College.

Ask a homework question - tutors are online