Learning Goal: I’m working on a finance multi-part question and need guidance to

Learning Goal: I’m working on a finance multi-part question and need guidance to help me learn.Computron Inc. is a 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. 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.The company recently hired Jenny Cochran, a graduate of UC to assist the chairman of the board to turnaround the fortunes of the company. Cochran recommendations included doubling the plant capacity, opening new sales offices outside the home territory, and launching an expensive advertising campaign to boost cash flows and stock price. Cochran believes that undertaking of such capital budgeting projects would increase sales, net income, and free cash flows to boost the stock price.The corporate tax rate is 40%.The following financial statement and reports were made available by the finance department for analysis:Computron’s Income Statement20192020Net sales2,059,2003,500,640Cost of Goods Sold1,718,4002,988,000Other Expenses204,000432,000Depreciation and amortization11,34070,176Total Operating Costs1,933,7403,490,176Earnings before interest and taxes (EBIT)125,46010,464Less interest37,500105,600Pre-tax earnings87,960(95,136)Taxes (40%)35,184(38,054)Net Income52,776(57,082)Computron’s Balance SheetAssetsCash and equivalents5,4004,369Short-term investments29,16012,000Accounts receivable210,720379,296Inventories429,120772,416Total current assets674,4001,168,081Gross fixed assets294,600721,770Less: Accumulated depreciation87,720157,896Net plant and equipment206,880563,874Total assets881,2801,731,955Liabilities and equityAccounts payable87,360194,400Notes payable120,000432,000Accruals81,600170,976Total current liabilities288,960797,376Long-term bonds194,059600,000Common Stock276,000276,000Retained Earnings122,26158,579Total Equity398,261334,579Total Liabilities and Equity881,2801,731,955Explain to the chairman of the board three properties of future cashflows that would likely help increase Computron’s value.
What is Computron’s net operating profit after taxes (NOPAT) for 2020?
Calculate Computron’s free cash flow for 2020 if net investment in total operating capital is $671,419.
Explain to the chairman of the board five uses of free cash flow to help maximize the value of the firm.
Explain Economic Value Added (EVA) and compute Computron’s EVA for 2020 if total net operating capital is $1,354,579? The company’s weighted average cost of capital (WACC) is 10.0%.
Calculate the following profitability ratios for Computron in 2020:
Operating profit margin
Return on assets (ROA)
Return on equity (ROE)
Basic Earning Power (BEP)
Calculate the following asset management ratios for Computron in 2020:total assets turnover
Days sales outstanding (DSO)
Calculate the following liquidity and debt management ratios for Computron in 2020:Current ratio
Quick ratio
Debt-to-assets ratio
Times-interest earned ratio
Given the following industry ratios for 2020, how do you evaluate the financial performance of Computron (poor or better) and explain:
a. Operating profit margin7.20%b. Basic Earning Power15.60%c. ROE15.40%d. Return on Assets10.80%e. Total Assets turnover1.5f. Days sales outstanding28.00g. Current ratio2.50h. Quick ratio1.90i. Debt-to-assets ratio15%j. Times-interest-earned13.00Computron has a negative free cash flow in 2020. The financial manager explains to the board that there is nothing wrong with value-adding growth, even if it causes negative free cash flows in the short-term. Using return on invested capital (ROIC) performance evaluation approach, determine whether Cochran’s recommendation is adding value. Total operating capital of the company is $1,354,579 and WACC is 10%.
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