what is the expected return on invested capital under each operating plan? Table

Question

what is the expected return on invested capital under each operating plan?

Table 1. Financial Statements and Other Data on Router and P Balance Sheets 12/31104 Current assets Net fixed assets Router Inc PNC $252,351 11,125,200 $1,012,969 $18,097,800 $1265.320 T2522T55 Total assets Current liabilities Long-term debt Total liabilities Preferred Stock Common stock Retained earnings Total common equity (50,000 shares for Router) $0 $1,241,100 8,0400 $2.206,400 $1,000,c0 6,510,490 27532$8,026,000 ,265,120 $16,536,490 Total liabilities and equity $1.265 Income Statements, 2004 Sales Revenues Routar Inc PNC $3,556,000 $82,739,300 $3,247,505 $74,727,413 3.619.560 232,495$4,392,327 693,000 $232,495 $3,699,327 $92,998 1,479,731 132,000 $139.4972,087.596 $109,497$1,507,000 Operating costs 76,000 Operating Income (EBIT) Interest Taxable Income Taxes Preferred dividends Net Income for common Free Cash Flow (FCF) Router 50,000 $2.79 PNC ndustry Shares outstanding Earnings per shane Dividends per shize 2,626,180 $0.79 $0.00 NIA Dividend payeut raide NOPAT Free Cacn Flow ROE Steck Price Erid of Year NIA 20% NIA N/A 14.7% N/A N/A 30.10 $139,497 $109,497 11.02% NIA $12,653 N/A N/A N/A 5.00% 4.80% NIA 0.0% 0.0% 100% $2,635 $1,507 12.62% $21.00 $6.30 26.42 Book value per share Price/Book ratio Beta Coefficient Risk-Free Rate Debt/Assets 1.35 5.00% 4.80% N/A 35.9% 75% 56.6% 1.35 5.00% 4.80% 8.30% Market Risk Premium Dividend growth rate 3.1% 61.7% Preferred stock/Assets Common equity/Assets Tax rate (Federal+State) Interest rate on all debt Preferred dividend yield N/A N/A 75% 6.0% 7.2% N/A

Explanation / Answer

Expected return on invested capital(ROI) = NI/INVESTED CAPITAL

ROUTER INC:

INVESTED CAPITAL: 1265320(EQUITY+LIABILITIES)

UNDER PLAN L ADDITIONAL CAPITAL REQUIRED IS "234680"

=139497/1265320+234680

=9.29%

NOW UNDER PLAN H:

139497/1265320+2734680

=3.487%

NOW FOR COMPANY PNC:

UNDER PLAN L:

NI/INVESTED CAPITAL

ADDITIONAL CAPITAL REQUIRED FOR THE PLAN IS "234680"

=2087596/(29223290+234680)

=7.08%

UNDER PLAN H:

ADDITIONAL CAPITAL REQUIRED IS "2734680"

R0IC= 2087596/ (29223290+2734680)

=6.54%

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