What are two critical operating assumptions

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You are valuing DistressCo, a company struggling to hold market share. The company currently generates $120 million in revenue, but its revenue is expected to shrink to $100 million next year. Cost of sales currently equals $90 million and depreciation equals $18 million. Working capital equals $26 million and equipment equals $120 million. Using this data, construct operating profit and invested capital for the current year. You decide to build an as-is valuation of DistressCo. To do this, you forecast each ratio (such as cost of sales revenues) at its current level. Based on this forecast method, what are operating profits and invested cpital expected to be next year? What are two critical operating assumptions (identify one for profits, and one for capital) embedded in this forecast method?

Reference no: EM13284811

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