Cobalt Industries had sales of 146,100 units at a price of $10.27 per unit. It f

Question

Cobalt Industries had sales of 146,100 units at a price of $10.27 per unit. It faced fixed operating costs of $256,000 and variable operating costs of $5.25 per unit. The company is subject to a tax rate of 38% and has a weighted average cost of capital of 7.3%. Calculate Cobalt's net operating profits after taxes (NOPAT), and use it to estimate the value of the firm. (Assume the firm's earnings are not growing.) 6. Cobalt's NOPAT is $ (Round to the nearest dollar.) The value of the firm is $ . (Round to the nearest dollar.)

Explanation / Answer

Particulars Amount ($) Calcualtion Revenue          1,500,447 146,100X10.27 Costs Variable operating costs    767,025 146,100X5.25 Fixed operating costs    256,000          1,023,025 Operating Profit 477,422 Taxes (38% tax rate) 181,420 477,422 X38% Net operating Profit after Tax 296,002 Value of the Firm = NOPAT/ Weighted average cost of Capital                                 = $296,002/7.3%                                 = $4,054,822

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