Question

Following are the balance sheets at year-end 2009 and 2010 followed by the 2010 income statement of Sactor Inc. The annual report for year 2010 provides the following supplemental information:
1. The restructuring charge of $43 million, amounted to $28 million after tax
2. Accumulated goodwill impairment was $98 million at the end of 2009 and $93 million at the end of 2010. Goodwill impairment was $22 million in 2010, or $14 million after tax
3. The accounts receivable are net of bad debt allowance. At the end of 2009, the accumulated bad debt allowance was $26 million; at the end of 2010, it was
$30 million
4. In 2009, the firm had a nonoperating extraordinary loss of $35 million after tax
a. Compute the unadjusted invested capital of Sactor Inc. at year-end 2009 and year-end 2010. Compute also the firm's net operating profit after tax (NOPAT).
b. Adjust the amounts of invested capital and NOPAT for accounting distortions.
c. Assuming a weighted average cost of capital of 10 percent, what was Sactor's economic value added in 2010?
Income Statement (in millions)
2010
Net sales.................. $2,888
Cost of goods sold.............. 2,167
Selling, general, and administrative expenses..... 434
Restructuring charge.............. 43
Earnings before interest and tax.......... $ 244
Interest expense................. 62
Earnings before tax................. $ 182
Income tax expense................. 64
Earnings after tax................. $ 118


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  • CreatedMarch 27, 2015
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