# Problem set

Satisfactory Essays
1. EP Enterprises has the following income statement. How much net operating profit after taxes (NOPAT) does the firm have?

Sales

\$1,800.00

Costs

1,400.00

Depreciation

250.00

EBIT

\$ 150.00

Interest expense

70.00

EBT

\$ 80.00

Taxes (40%)

32.00

Net income

\$ 48.00

a.
\$81.23

b.
\$85.50

c.
\$90.00

EBIT \$150.00

d.
\$94.50

Tax Rate 40%

e.
\$99.23

NOPAT=\$90.0

2. Tibbs Inc. had the following data for the year ending 12/31/07: Net income = \$300; Net operating profit after taxes (NOPAT) = \$400; Total assets = \$2,500; Short-term investments = \$200; Stockholders' equity = \$1,800; Total debt = \$700; and Total operating capital = \$2,300. What was its return on invested capital (ROIC)?

a.
14.91%

NOPAT = \$400

b.
15.70%

To OCap=\$2500

c.
16.52%

NOPAT

d.
17.39%

TOC = ROIC
\$400/\$2300=

e.
18.26%

3.
Aziz Industries has sales of \$100,000 and accounts receivable of \$11,500, and it gives its customers 30 days to pay. The industry average DSO is 27 days, based on a 365-day year. If the company changes its credit and collection policy sufficiently to cause its DSO to fall to the industry average, and if it earns 8.0% on any cash freed-up by this change, how would that affect its net income, assuming other things are held constant?

a.
\$267.34

b.
\$281.41

c.
\$296.22

d.
\$311.81

e.
\$328.22

4.
Heaton Corp. sells on terms that allow customers 45 days to pay for merchandise. Its sales last year were \$425,000, and its year-end receivables were \$60,000. If its DSO is less than the 45-day credit period, then customers are paying on time.

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