Use the following data to compute ROPI for Intel Corporation for 2016 through the terminal period. Assume that the company's weighted average cost of capital is 9%.
| Actual | Horizon Period | Terminal | ||||
|---|---|---|---|---|---|---|
| $ millions | 2015 | 2016 | 2017 | 2018 | 2019 | Period |
| Sales | $55,910 | $61,999 | $68,143 | $74,215 | $79,406 | $80,955 |
| NOPAT | 11,621 | 13,851 | 14,526 | 15,802 | 16,103 | 15,609 |
| NOA | 51,488 | 57,157 | 62,873 | 68,521 | 72,674 | 74,101 |
Round answers to the nearest whole number.
| Forecast Horizon | Terminal | |||||
|---|---|---|---|---|---|---|
| ($ millions) | 2016 | 2017 | 2018 | 2019 | Period | |
| ROPI | ||||||
Homework Answers
We know that
ROPI = NOPAT – (WACC × NOABeg)
So for 2016,
ROPI of 2016 = NOPAT of 2016 - (WACC* NOA of 2015) = 13851 - (0.09*51488) = $9217.08
ROPI of 2017 = NOPAT of 2017 - (WACC* NOA of 2016) = 14526 - (0.09*57157) = $9381.87
ROPI of 2018 = NOPAT of 2018 - (WACC* NOA of 2017) = 15802 - (0.09*62873) = $10143.43
ROPI of 2019 = NOPAT of 2019 - (WACC* NOA of 2018) = 16103 - (0.09*68521) = $9936.11
ROPI of TP = NOPAT of TP - (WACC* NOA of 2019) = 15609 - (0.09*72674) = $9068.34
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