Finance Assignment
Case I
For 2020, Solvent Corp. reported net sales of $ 415 million, 6% up from the previous year. Its operating profit (EBIT) amounted to $ 40 million in the same period. Due to substantial investments in net working capital, the company's net book value grew from $ 215 million to $ 230 million, while net fixed assets remained stable at $ 130 million. The firm managed to maintain its capital structure with a debt to equity ratio of 0.75 and a 40% Equity Ratio.
Assuming a corporate income tax rate of 25% and interest rate of 5.0%, please determine the following:
• Net Profit Margin.
• Working Capital Requirement (WCR) and working capital ratio over sales for 2020.
• Post-tax Return On Invested Capital (ROIC) for 2020.
• Free Cash Flow (FCF) for 2020.
Case II
In 2019, Manufactor Inc. had $ 16,5 million in operating income (EBIT). The company had a net depreciation expense of $ 3,3 million and an interest expense of $ 2,2 million; its corporate income tax was 40%. The company has $ 44 million in operating current assets and $ 15,4 million in operating current liabilities; it has $ 49,5 million in net fixed assets. It estimates that it has a post-tax cost of capital of 10%.
Assuming that Manufactor's only non-cash item was depreciation, please answer the ensuing questions:
• What was the company's net income after taxes (NEAT) for the year?
• What was the company's Net Operating Profit After Taxes (NOPAT)?
• What was the company's net operating working capital (WC) and total net operating capital for the current year?
• If the Working Capital Ratio (WCR/sales) read 25% in 2019, what was the company's sales revenue?
• If total net operating capital was $ 75 million for the previous period (2018), what was the company's Free Cash Flow (FCF) in 2019?
Case III
The following data applies to BigCo. Inc. (in millions of US $):
o Cash & marketable securities $165
o Fixed assets $286
o Net sales $1320
o Earnings Before Interests and Taxes (EBIT) $143
o Net Earnings After Taxes (NEAT ) $ 66
o Quick Ratio ((CA-Inventory)/CL) 2.1 to 1
o Current Ratio (CA/CL) 3.4 to 1
o Average Collection Period (ACP) 45.60 days
o Return on Equity (ROE, NEAT/Net Common Equity) 13%
o Tax rate 25%
On the Liabilities & Equity side, BigCo has only common equity, debt and current operating liabilities.
• Find BigCo's (1) Accounts Receivables, (2) Current Operating Liabilities, (3) Current Assets, (4) Total Assets, (5) Net Common Equity, and (6) Debt.
• If BigCo managed to reduce its ACP by 15.60 days (i.e., totaling 30 days) while holding other things constant, how much cash could it generate?
• What is BigCo's ROIC (post-tax)?
Format your assignment according to the give formatting requirements:
• The answer must be using Times New Roman font (size 12), double spaced, typed, with one-inch margins on all sides.
• The response also includes a cover page containing the student's name, the title of the assignment, the course title, and the date. The cover page is not included in the required page length.
• Also include a reference page. The references and Citations should follow APA format. The reference page is not included in the required page length.