Lan & Chen Technologies: Income Statements for Year Ending December 31 (Thousand
ID: 2667375 • Letter: L
Question
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 =
Explanation / Answer
a) Computing the Net Operating working Capital using the given data: 2010 NOWC = Operating current assets - Operating current liabilities = $472,500 - $141,750 = $330,750 2009 NOWC = Operating current assets - Operating current liabilities = $450,000 - $135,000 = $315,000 Total net operating capital (2010) = NOWC + Fixed assets = $330,750 + $330,750 = $661,500 Total net operating capital (2009) = NOWC + Fixed assets = $315,000 + $315,000 = $630,000 Investment in total net operating capital (2010) = TOC for 2010 - TOC for 2009 where TOC is the Total net operating capital. Investment in TOC for 2010 = $661,500 - $630,000 = $31,500 Net operating profit after taxes: NOPAT (2010) = EBIT (1-T) = $99,200 (1 - 0.40) = $99,200 (0.60) = $59,520 Free cash flow (2010) = NOPAT - Net investment in Operating capital = $59,520 - $31,500 = $28,020 Return on Invested capital (2010) = NOPAT / Net operating capital = $59,520 / $661,500 = 0.09 or 9.0% b) MVA = (Stock price * Number of shares) - Total Common equity = ($65 * 15,000) - $544,538 = $975,000 - $544,538 = $430,462 EVA = NOPAT - (Operating capital * After-tax cost of capital ) = $59,520 - ($661,500 * 0.08) = $59,520 - $52,920 = $6,600Related Questions
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