Illustrate what are operating profits and invested capital

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Reference no: EM1399524

Q. You are valuing Distress Co, an industry struggling to hold market share. The industry presently generates $120 million in revenue but its revenue is expected to shrink to $100 million next year. Cost of sales presently equal $90 million and depreciation equals $18 million. Working capital equals $36 million and invested capital for the present year. You decide to build an as-is valuation of Distress Co. To do this, you forecast each ratio (such as cost of sales to revenues) at its present level. Based on this forecast method, illustrate what are operating profits and invested capital expected to be next year? Illustrate what are two critical operating assumptions (classify one for profit and one for capital) embedded in this forecast method.

Reference no: EM1399524

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