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Homework answers / question archive / Ogier Incorporated currently has $700 million in sales, which are projected to grow by 8% in Year 1 and by 3% in Year 2
Ogier Incorporated currently has $700 million in sales, which are projected to grow by 8% in Year 1 and by 3% in Year 2. Its operating profitability (OP) is 7%, and its capital requirement (CR) is 65%. Do not round intermediate calculations. Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to two decimal places.
1). Computation of the projected sales in year 1 and 2:-
Projected sales = Current sales * (1 + Growth rate)
Sales in year 1 = $700 * (1 + 8%)
= $756 million
Sales in year 2 = $756 * (1 + 3%)
= $778.68 million
2). Computation of the projected amounts of net operating profit after taxes (NOPAT) for Years 1 and 2:-
NOPAT = Sales * Operating profitability
NOPAT for year 1 = $756 * 7%
= $52.92 million
NOPAT for year 2 = $778.68 * 7%
= $54.51 million
3). Computation of the projected amounts of total net operating capital (OpCap) for Years 1 and 2:-
Net operating capital = Sales * Capital requirement
Net operating capital for year 1 = $756 * 65%
= $491.40 million
Net operating capital for year 2 = $778.68 * 65%
= $506.14 million
4). Computation of the projected FCF for Year 2:-
Additional capital expenditure = $506.14 - $491.40
= $14.74 million
FCF for year 2 = NOPAT - Additional capital expenditure
= $54.51 - $14.74
= $39.77 million
