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Compute the terminal value of the residual operating income

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Reference no: EM132557725

Question 1: Assuming sales in the second to last year of the horizon period are $1,000,000 and a weighted average cost of capital (WACC) of 10%, use the information provided below to compute the terminal value of the residual operating income (ROPI) at the end of the horizon period.

                                                     Last year in horizon period                Terminal period

Sales growth                                                   4.0%                                 3.0%

Net operating profit margin (NOPM)                      8.0%                                 7.0%

Net operating asset turnover (NOAT)                       5.0                                    ?

Question 2: You are required to value the equity of Cooper Corporation Limited as at 31 March 2020 based on the information below:

Weighted average cost of capital is 10%.

The net operating assets (NOA) and net nonoperating obligations (NNO) at 31 March 2020 are $500,819 and $100,000, respectively.

The forecasted ROPI for the horizon period, being the years ended 31 March 2021, 2022, and 2023 are $20,000, $22,000, and $24,000, respectively.

The forecasted ROPI in the terminal period is $25,000, and the terminal period growth rate is 2%.

Reference no: EM132557725

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