Estimating Share Value Using the ROPI Model
Assume the following are the income statement and balance sheet for Intel Corporation.
Net revenue |
$ 44,223 |
$ 35,127 |
$ 37,586 |
Cost of sales |
15,132 |
15,566 |
16,742 |
Gross margin |
29,091 |
19,561 |
20,844 |
Research and development |
6,576 |
5,653 |
5,722 |
Marketing, general and adminstrative |
6,309 |
7,931 |
5,452 |
Restructuring and asset impairment charges |
-- |
231 |
710 |
Amortization of acquisition-related intangibles |
18 |
35 |
6 |
Operating expenses |
12,903 |
13,850 |
11,890 |
Operating income |
16,188 |
5,711 |
8,954 |
Gains (losses) on equity method investments, net* |
117 |
(147) |
(1,380) |
Gains (losses) on other equity investments, net |
231 |
(23) |
(376) |
Interest and other, net |
109 |
163 |
488 |
Income before taxes |
16,645 |
5,704 |
7,686 |
Provisions for taxes |
4,581 |
1,335 |
2,394 |
Net income |
$ 12,064 |
$ 4,369 |
$ 5,292 |
*This should be considered as operating income.
Assets |
|
|
Current assets |
|
|
Cash and cash equivalents |
$ 5,498 |
$ 3,987 |
Short-term investments |
11,294 |
5,285 |
Trading assets |
5,093 |
4,648 |
Accounts receivables, net |
2,667 |
2,273 |
Inventories |
3,757 |
2,935 |
Deferred tax assets |
1,888 |
1,216 |
Other current assets |
1,614 |
813 |
Total current assets |
31,811 |
21,157 |
Property, plant and equipment, net |
17,899 |
17,225 |
Marketable equity securities |
1,008 |
773 |
Other long-term investments** |
3,026 |
4,179 |
Goodwill |
4,531 |
4,421 |
Other long-term assets |
5,111 |
5,340 |
Total assets |
$63,386 |
$53,095 |
Liabilities |
|
|
Currnet liabilities |
|
|
Short-term debt |
$38 |
$172 |
Accounts payable |
2,190 |
1,883 |
Accrued compensation and benefits |
2,888 |
2,448 |
Accrued advertising |
1,007 |
773 |
Deferred income on shipments to distributors |
622 |
593 |
Other accrued liabilities |
2,482 |
1,722 |
Total current liabilities |
9,227 |
7,591 |
Long-term income taxes payable |
190 |
193 |
Long-term debt |
1,677 |
2,049 |
Long-term deferred tax liabilities |
926 |
555 |
Other long-term liabilities |
1,236 |
1,003 |
Total liabilities |
13,256 |
11,391 |
Stockholders' equity: |
|
|
Preferred stock, $0.001 par value |
-- |
-- |
Common stock, $0.001 par value, 10,000 shares authorized; 5,581 issued and 5,511 outstanding and capital in excess of par value |
16,178 |
14,993 |
Accumulated other comprehensive income (loss) |
333 |
393 |
Retained earnings |
33,619 |
26,318 |
Total stockholders' equity |
50,130 |
41,704 |
Total liabilities and stockholders' equity |
$ 63,386 |
$ 53,095 |
** These investments are operating assets as they relate to associated companies.
(a) Compute Intel's net operating assets (NOA) for year-end 2010.
(b) Compute net operating profit after tax (NOPAT) for 2010, assuming a federal and state statutory tax rate of 37%.
HINT: Gains/losses on equity method investments are considered operating income. Round your answer to the nearest whole number.
2010 NOPAT = $Answer
(c) Forecast Intel's sales, NOPAT, and NOA for years 2011 through 2014 using the following assumptions:
Sales growth |
10% |
Net operating profit margin (NOPM) |
26% |
Net operating asset turnover (NOAT) at fiscal year-end |
1.50 |
Forecast the terminal period value using the assumptions above and assuming a terminal period growth of: 1%.