4/16/2010 Chapter 2. 2-15 a. Using the financial statements shown below, calculate net operating working capital, total net operating capital, net...

Chapter 2. 2-15a. 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)20102009Sales$945,000$900,000Expenses excluding depreciation and amortization812,700774,000 EBITDA$132,300$126,000Depreciation and amortization33,10031,500 EBIT$99,200$94,500Interest Expense10,4708,600 EBT$88,730$85,900Taxes (40%)35,49234,360 Net income$53,238$51,540Common dividends$43,300$41,230Addition to retained earnings$9,938$10,310Lan & Chen Technologies: December 31 Balance Sheets(Thousands of Dollars)Assets20102009Cash and cash equivalents$47,250$45,000Short-term investments3,8003,600Accounts Receivable283,500270,000Inventories141,750135,000 Total current assets$476,300$453,600 Net fixed assets330,750315,000Total assets$807,050$768,600Liabilities and equityAccounts payable$94,500$90,000Accruals47,25045,000Notes payable26,2629,000 Total current liabilities$168,012$144,000Long-term debt94,50090,000 Total liabilities$262,512$234,000Common stock444,600444,600Retained Earnings99,93890,000 Total common equity$544,538$534,600Total liabilities and equity$807,050$768,600Key Input DataTax rate40%Net operating working capital2010NOWC = Operating current assets-Operating current liabilities2010NOWC = $472,500-$141,7502010NOWC = $330,7502009NOWC = Operating current assets-Operating current liabilities2009NOWC = $450,000-$135,0002009NOWC = $315,000Total net operating capital2010TOC = NOWC+Fixed assets2010TOC = $330,750+$330,7502010TOC = $661,5002009TOC = NOWC+Fixed assets2009TOC = $315,000+$315,0002009TOC = $630,000Investment in total net operating capital201020092010Inv. In TOC = TOC-TOC2010Inv. In TOC = $661,500-$630,0002010Inv. In TOC = $31,500Net operating profit after taxes2010NOPAT = EBITx( 1 - T )2010NOPAT = $99,200x60%2010NOPAT = $59,520Free cash flow2010FCF = NOPAT-Net investment in operating capital2010FCF = $59,520-$31,5002010FCF = $28,020Return on invested capital2010ROIC = NOPAT/Total net operating capital2010ROIC = $59,520/$661,5002010ROIC = 9.0%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 DataStock price per share$65.00# of shares (in thousands)15,000After-tax cost of capital8.0%Market Value AddedMVA = Stock pricex# of shares-Total common equityMVA = $65.00x15,000,000-$544,538MVA = $975,000,000-$544,538MVA = $974,455,462Economic Value AddedEVA = NOPAT-(Operating Capital xAfter-tax cost of capital)EVA = $59,520-$661,500x8%EVA = $59,520-$52,920EVA = $6,600