Mva Finance

c) Free cash flow is the amount of cash available from opérations for distribution to all investors (including stcokholders and debtholders) after making the necessary investments to support operations.

Free cash flow is important because it allows a company to pursue opportunities that enhance shareholder value. Without cash, it's tough to develop new products, make acquisitions, pay dividends and reduce debt. A company’s value depends upon the amount of free cash flow it can generate.

The five uses of free cash flow are :

-Pay interest on debt.

-Pay back principal on debt.

-Pay dividends.

-Buy back stock.

-Buy non operating assets.

d) NOPAT (2009) = EBIT (1 – tax rate)

= 209 100 * 0.6

= 125 460

NOPAT (2010) = 17 440 * 0.6

= 10 464

Operating current assets (2009) = cash + inventories + accounts receivable

= 9000 + 351 200 + 715 200

= 1 075 400

Operating current assets (2010) = 7282 + 632 160 + 1 287 360

= 1 926 802

Operating current liabilities (2009) = accounts payable + accruals

= 145 600 + 136 000

= 281 600

Operating current liabilities (2010) = 324 000 + 284 960

= 608 960

NOWC (2009) = current assets – (current liabilities – notes payable)

= 1 124 000 – (481 600 – 200 000)

= 842 400

NOWC (2010) = 1 946 802 – ( 1 328 960 – 720 000)

= 1 337 842

Operating capital (2009) = NOWC + net fixed assets

= 842 400 + 344 800

= 1 187 200

Operating capital (2010) = 1 337 842 + 939 790

= 2 277 632

e) FCF = (EBIT (1 – t ) + depreciation ) – (capital expenditures + variation in NOWC)

= (17 440 (0.6) + 116 960) – ( 1 102 950 – 491 000 + 495 442)

= ( 1 079 968 )

Computron’s free cash flow is negative due to the company’s expansion : double plant facility , open new stores, and launch and advertising campaign.

f) ROIC = net income + dividends / capital

= (95 136 ) + 11 000 / 10 464

= (8.04)

Computron growth did not add value.

g) EVA (2009) = NOPAT – ( capital * cost of capital)

=125 460 – ( 1 187 200 * 10% )

=...