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a. Using the financial statements shown below, calculate net operating working capital, total net operating capital, net operating profit after taxes, free cash flow, and return on invested capital for the most recent year. ,,,Lan & Chen Technologies: Income Statements for Year Ending December 31 ,(Thousands of Dollars) 2010 2009 ,Sales $945,000 $900,000 ,Expenses excluding depreciation and amortization 812,700 774,000 ,EBITDA $132,300 $126,000 ,Depreciation and amortization 33,100 31,500 ,EBIT $99,200 $94,500 ,Interest Expense 10,470 8,600 ,EBT $88,730 $85,900 ,Taxes (40%) 35,492 34,360 ,Net income $53,238 $51,540 ,,Common dividends $43,300 $41,230 ,Addition to retained earnings $9,938 $10,310 ,,Lan & Chen Technologies: December 31 Balance Sheets ,(Thousands of Dollars) ,Assets 2010 2009 ,Cash and cash equivalents $47,250 $45,000 ,Short-term investments 3,800 3,600 ,Accounts Receivable 283,500 270,000 ,Inventories 141,750 135,000 ,Total current assets $476,300 $453,600 ,Net fixed assets 330,750 315,000 ,Total assets $807,050 $768,600 ,,Liabilities and equity ,Accounts payable $94,500 $90,000 ,Accruals 47,250 45,000 ,Notes payable 26,262 9,000 ,Total current liabilities $168,012 $144,000 ,Long-term debt 94,500 90,000 ,Total liabilities $262,512 $234,000 ,Common stock 444,600 444,600 ,Retained Earnings 99,938 90,000 ,Total common equity $544,538 $534,600 ,Total liabilities and equity $807,050 $768,600 ,,Key Input Data ,Tax rate 40% ,,Net operating working capital ,2010 NOWC = Operating current assets – Operating current liabilities ,2010 NOWC = – ,2010 NOWC = ,,2009 NOWC = Operating current assets – Operating current liabilities ,2009 NOWC = – ,2009 NOWC = ,,Total net operating capital ,2010 TOC = NOWC + Fixed assets ,2010 TOC = + ,2010 TOC = ,,2009 TOC = NOWC + Fixed assets ,2009 TOC = + ,2009 TOC = ,,Investment in total net operating capital ,2010 2009 ,2010 Inv. In TOC = TOC – TOC ,2010 Inv. In TOC = – ,2010 Inv. In TOC = ,,Net operating profit after taxes ,2010 NOPAT = EBIT x ( 1 – T ) ,2010 NOPAT = x ,2010 NOPAT = ,,Free cash flow ,2010 FCF = NOPAT – Net investment in operating capital ,2010 FCF = – ,2010 FCF = ,,Return on invested capital ,2010 ROIC = NOPAT / Total net operating capital ,2010 ROIC = / ,2010 ROIC = ,,b. Assume that there were 15 million shares outstanding at the end of the year, the year-end closing stock price was $65 per share, and the after-tax cost of capital was 8%. Calculate EVA and MVA for the most recent year. ,,,Additional Input Data ,Stock price per share $65.00 ,# of shares (in thousands) 15,000 ,After-tax cost of capital 8.0% ,,Market Value Added ,MVA = Stock price x # of shares – Total common equity ,MVA = x – ,MVA = – ,MVA = ,,Economic Value Added ,EVA = NOPAT – (Operating Capital x After-tax cost of capital) ,EVA = – x ,EVA = – ,EVA =,, ,

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