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Economic Value Added (EVA) and compute Computron’s EVA

Dilli Bista, MBA is the financial manager for Computron Inc. a large public corporation specializing in software manufacturing. The company designs and develops software programs that allow users to create their own documents, apps, animations, and other media content. Despite a huge investment made last three years in fixed assets, the company’s sales revenue and profit margins have decreased over the years because of the Covid-19 pandemic and complaints of some parents about the effect of video games on their kids’ social life and academic performance. Dilli is analyzing the company’s financial statements and annual reports to determine the financial performance of the company for the year and see how the performance can be improved.

Dilli noticed that last year the company had $4 million in operating income (EBIT). The company had a depreciation expense of $1 million and an interest expense of $1 million. The company’s tax rate is 25%. The company has $14 million in operating current assets and $4 million in operating current liabilities and has $15 million in net plant and equipment. The company has after-tax cost of capital of 10%.

  1. List four types of financial statements that the company’s annual report typically include. State three items that can be found in each of the financial statement of Computron Inc.
  2. Determine Computron’s net income for the year. Show your calculations.
  3. What was Computron’s net cash flow?
  4. What was Computron’s net operating profit after taxes (NOPAT)?
  5. Calculate net operating working capital and total net operating capital for the year.
  6. Calculate Computron’s free cash flow for the year if net operating capital in the previous year was $24 million.
  7. Explain to the chairman of the board five uses of free cash flow that can help maximize the value of the firm.
  8. Explain Economic Value Added (EVA) and compute Computron’s EVA if total net operating capital is $25 million? The company’s after-tax cost of capital is 10.0%.
  9. Compute and explain market value added (MVA) for Computron using the following information: i. total number of shares outstanding is 2 millionii. current stock price is $35 per share iii. total common equity is $68.2 million</code></pre></li>Calculate the company’s return on invested capital (ROIC). Do you think Computron’s growth added value?

Sample Solution

y, alongside innovators today including Frowe (2011). Their hypothesis is concocted as an aide, regardless of whether we ought to do battle alongside conditions which should be thought of, how would it be a good idea for us we respond and not do during a conflict on the off chance that it is unavoidable, lastly what further move ought to be initiated later. To assess this hypothesis, one should take a gander at the suppositions made towards it, for instance, entertainers which scholars forget about and the delay between conventional scholars and pioneers. In particular, there can be no conclusive hypothesis of the simply war, in light of the fact that everyone has an alternate understanding of this hypothesis, given its normativity. Be that as it may, the hypothesis gives an unpleasant showcase of how we ought to continue in the midst of strain and struggle, vitally the point of a simply war: 'harmony and security of the region' (Begby et al, 2006b, Page 310). Generally speaking, this hypothesis is reasonable to utilize yet can't at any point be viewed as a characteristic aide since it's normatively conjectured. To respond to the inquiry, the paper is contained 3 areas. Jus promotion bellum The beginning segment covers jus promotion bellum, the circumstances discussing whether an activity is legitimately OK to cause a conflict (Frowe (2011), Page 50). First and foremost, Vittola examines one of the worthwhile motivations of war, in particular, is when damage is caused yet he causes notice the damage doesn't prompt conflict, it relies upon the degree or proportionality, one more condition to jus promotion bellum (Begby et al (2006b), Page 314). Frowe, in any case, contends the possibility of "admirable motivation" in view of "Power" which alludes to the assurance of political and regional privileges, alongside common freedoms. In contemporary view, this view is more convoluted to reply, given the ascent of globalization. Additionally, it is challenging to gauge proportionality, especially in war, in light of the fact that not just that there is an epistemic issue in ascertaining, however again the present world has created (Frowe (2011), Page 54-6). Besides, Vittola contends war is important, not just for cautious purposes, 'since it is legal to oppose force with force,' yet in addition to battle against the uncalled for, a hostile conflict, countries which are not rebuffed for acting shamefully towards its own kin or have unreasonably taken land from the home country (Begby et al (2006b), Page 310&313); to "show its foes a thing or two," however essentially to accomplish the point of war. This approves Aristotle's contention: 'there should be battle for harmony (Aristotle (1996), Page 187).
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