The CEO of TPI Inc. considers the possibility to restructure one of the business segments of...

 

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The CEO of TPI Inc. considers the possibility to restructure one of the business segments of TPI. The analysts at TPI have prepared projections for the operations of the segment. These forecasts are provided in Table A. In addition to that, they have estimated that the cost of capital for this segment would be 14%, while its long-term growth rate would be 7%. Moreover, you know that the tax rate is 38% and the initial invested capital is $70 million. Your task is to perform EVA analysis of the segment (assume the current year is 2007). EBIT Depreciation Increase in Deferred tax Capex ANWC Table A 2008 24.8 5.8 0.8 18.2 -0.8 2009 28.0 7.6 0.6 12.2 -0.8 Hint: NOPAT is EBIT*(1-t) + Increase in Deferred Tax. 2010 32.0 9.2 0.7 14.3 1.0 2011 34.0 10.2 0.7 14.3 1.8 2012 37.0 11.0 1.0 12.0 0.0 The CEO of TPI Inc. considers the possibility to restructure one of the business segments of TPI. The analysts at TPI have prepared projections for the operations of the segment. These forecasts are provided in Table A. In addition to that, they have estimated that the cost of capital for this segment would be 14%, while its long-term growth rate would be 7%. Moreover, you know that the tax rate is 38% and the initial invested capital is $70 million. Your task is to perform EVA analysis of the segment (assume the current year is 2007). EBIT Depreciation Increase in Deferred tax Capex ANWC Table A 2008 24.8 5.8 0.8 18.2 -0.8 2009 28.0 7.6 0.6 12.2 -0.8 Hint: NOPAT is EBIT*(1-t) + Increase in Deferred Tax. 2010 32.0 9.2 0.7 14.3 1.0 2011 34.0 10.2 0.7 14.3 1.8 2012 37.0 11.0 1.0 12.0 0.0

Answer rating: 100% (QA)

NOPAT Net Operating Profit After Taxes EBIT1t Increase in Deferred Tax NOPAT for each year first is ... View the full answer