Calculate Computron’s return on invested capital (ROIC). Computron has a 10% cost of capital (WACC). What caused the decline in the ROIC? Was it due to operating profitability or capital utilization? Do you think Computron’s growth added value?What is Computron's EVA? The cost of capital was 10% in both years.Assume that a corporation has $200,000 of taxable income from operations. What is the company's federal tax liability?Assume that you are in the 25% marginal tax bracket and that you have $50,000 to invest. You have narrowed your investment choices down to municipal bonds yielding 7% or equally risky corporate bonds with a yield of 10%. Which one should you choose and why? At what marginal tax rate would you be indifferent? Computron's Income Statement20192020INCOME STATEMENTNet salesCost of Goods Sold (Except depr. and amort.)2,059,2003,500,6401,718,4002,988,000Other Expenses204,000432,000Depreciation and amort zationTotal Operating CostsEarnings before interestand taxes (EBIT)Less interest11,34070,1761,933,7403,490,176125,46010,46437,500105,600Pre-tax earnings87,960-95,136Taxes (40%)35,184-38,054.4Net Income52,776-57,081.6Dividends13,200 6,600Тах rate40%40%Computron's Balance Sheets20192020AssetsCash and equivalentsShort-term investments5,4004,369.229,16012,000Accounts receivable210,720379,296Inventories429,12072,416רTotal current assets674,4001,168,081.2Gross fixed assets294,600721,770Less: Accumulated depreciationNet plant and equipmenTotal assets87,720157,896206,880563,874881,2801,731,955.2Liabilities and equityAccounts payableNotes payable87,360194,400120,000432,000Accruals81,600170,976Total current liabilities288,960797,376Long-term bondsCommon StockRetained Earnings194,059.2600,000276,000276,000122,260.858,579.2Total Equity398,260.8334,579.2Total Liabilites and Equity881,2801,731,955.2 Computron's Income Statement20192020INCOME STATEMENTNet salesCost of Goods Sold (Except depr. and amort.)2,059,2003,500,6401,718,4002,988,000Other Expenses204,000432,000Depreciation and amort zationTotal Operating CostsEarnings before interestand taxes (EBIT)Less interest11,34070,1761,933,7403,490,176125,46010,46437,500105,600Pre-tax earnings87,960-95,136Taxes (40%)35,184-38,054.4Net Income52,776-57,081.6Dividends13,200 6,600Тах rate40%40%Computron's Balance Sheets20192020AssetsCash and equivalentsShort-term investments5,4004,369.229,16012,000Accounts receivable210,720379,296Inventories429,12072,416רTotal current assets674,4001,168,081.2Gross fixed assets294,600721,770Less: Accumulated depreciationNet plant and equipmenTotal assets87,720157,896206,880563,874881,2801,731,955.2Liabilities and equityAccounts payableNotes payable87,360194,400120,000432,000Accruals81,600170,976Total current liabilities288,960797,376Long-term bondsCommon StockRetained Earnings194,059.2600,000276,000276,000122,260.858,579.2Total Equity398,260.8334,579.2Total Liabilites and Equity881,2801,731,955.2

WORKING NOTES: WN 1 2019 2020 $ $ NOPAT =EBIT (1-TAX RATE) EBIT 125460 10464…

Calculate Computron’s return on invested capital (ROIC). Computron has a 10% cost of capital (WACC). What caused the decline in the ROIC? Was it due to operating profitability or capital utilization? Do you think Computron’s growth added value? What is Computron's EVA? The cost of capital was 10% in both years. Assume that a corporation has $200,000 of taxable income from operations. What is the company's federal tax liability? Assume that you are in the 25% marginal tax bracket and that you have $50,000 to invest. You have narrowed your investment choices down to municipal bonds yielding 7% or equally risky corporate bonds with a yield of 10%. Which one should you choose and why? At what marginal tax rate would you be indifferent?

Calculate Computron’s return on invested capital (ROIC). Computron has a 10% cost of capital (WACC). What caused the decline in the ROIC? Was it due to operating profitability or capital utilization? Do you think Computron’s growth added value? What is Computron's EVA? The cost of capital was 10% in both years. Assume that a corporation has $200,000 of taxable income from operations. What is the company's federal tax liability? Assume that you are in the 25% marginal tax bracket and that you have $50,000 to invest. You have narrowed your investment choices down to municipal bonds yielding 7% or equally risky corporate bonds with a yield of 10%. Which one should you choose and why? At what marginal tax rate would you be indifferent?

Survey of Accounting (Accounting I)

8th Edition

ISBN:9781305961883

Author:Carl Warren

Publisher:Carl Warren

Chapter15: Capital Investment Analysis

Section: Chapter Questions

Problem 15.5.1MBA

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