Verified Test Bank Case Study Heineken Chapter 24

Chapter: Chapter 24: Case Study: Heineken

Multiple Choice

1. Which of the following are NOT recommended in the treatment of depreciation, amortization, and impairments in the calculation of NOPLAT?

a) Separate any impairments from income on nonconsolidated investments.

b) Combine depreciation of property, plant, and equipment (PP&E) with impairments.

c) Separate the depreciation of property, plant, and equipment (PP&E) from amortization.

d) Within amortization, separate amortization of acquired intangibles from operating amortization.

Response: [Separate the depreciation of property, plant, and equipment (PP&E) from amortization and impairments.]

2. Which of the following would be the most likely change(s) to be included in NOPLAT?

a) Changes in deferred taxes from tax rate revisions.

b) Change in deferred taxes as a result of acquisitions.

c) Change in deferred taxes as a result of the sale of a discontinued division.

d) Changes in deferred taxes from depreciation differences in net property, plant, and equipment (NPPE).

Response: [Annual changes in operating deferred taxes are included in NOPLAT as part of operating cash taxes if the changes were (1) recurring and (2) charged or credited to the income statement. A good example is deferred taxes driven by depreciation differences in net property, plant, and equipment (NPPE). One-time changes from a change in tax rates, an acquisition, or a divestiture are not included.]

3. Which of the following from the NOPLAT statement is NOT included in the amount of investments in goodwill and acquired intangibles?

a) The implied interest rate on the goodwill and acquired intangibles.

b) The annual change in the sum of goodwill and acquired intangibles.

c) The reversal of intangibles value adjustments in the invested-capital statement.

d) The sum of amortization of acquired intangibles and impairment of acquired intangibles and goodwill for the year.

Response: []

4. Given the following information concerning the pension of a company, compute the operating pension costs and the total pension costs in the income statement: current service costs = $39, past service costs = $2, interest obligation = $55, expected return on plan assets = $57.

a) $35 and $37, respectively.

b) $39 and $37, respectively.

c) $41 and $39, respectively.

d) $43 and $41, respectively.

Response: [

]

AU: Please rekey equation above. In 2nd line, please lowercase “o”: Nonoperating. Change hyphens to minus signs, insert spaces around operators (except –$2), and run in closing bracket.

True/False

5. Tax loss carryforwards are unrelated to any other balance sheet item and are treated as a separate nonoperating asset in invested-capital calculations. They do not affect NOPLAT.

Response: []

6. When computing investment cash flows, all impairments should be subtracted to decrease property, plant, and equipment (PP&E), operating intangibles, and nonconsolidated investments.

Response: [All impairments are added to the increases in property, plant, and equipment (PP&E), operating intangibles, and nonconsolidated investments when calculating the corresponding investment cash flows.]

7. When calculating gross investments, it is appropriate to add the increase in the foreign-currency translation reserve to capital expenditures to obtain the actual cash spent on capital investments.

Response: [When calculating gross investments, it is appropriate to deduct the increase in the foreign-currency translation reserve from capital expenditures to obtain the actual cash spent on capital investments.]