At the end of the fiscal 2008 Estee Lauder had 195 million shares outstanding wi
ID: 2670408 • Letter: A
Question
At the end of the fiscal 2008 Estee Lauder had 195 million shares outstanding with a share price of $45.50. The company’s weighted-average cost of capital was about 10%. Calculate
a. Market Value added.
b. Market to book ratio.
c. Economic value added.
d. Return on capital.
End of Year Start of Year
BALANCE SHEET
Assets
Current assets:
Cash and marketable securities 402 254
Accounts receivable 1039 861
Inventories 987 856
Other current assets 360 259
Total current assets 2787 2239
Fixed assets:
Tangible fixed assets
Property, plant, and equipment 2,394 2,113
Less accumulated depreciation 1,351 1,232
Net tangible fixed assets 1,043 881
Long-term investments 24 22
Other long-term assets 1,157 984
Total Assets 5,011 4,126
Liabilities and shareholder’s equity
Current liabilities
Debt due for repayment 119 60
Accounts payable 1,581 1,440
Total current liabilities 1,699 1,501
Long-term debt 1,078 1,028
Other long-term liabilities 581 398
Total Liabilities 3,358 2,927
Total shareholder’s equity 1,653 1,199
Total Liabilities and shareholders equity 5,011 4,126
INCOME STATEMENT
Net sales 7,911
Cost of goods sold 1,997
Selling, general, and administrative expenses 4,852
Depreciation 251
Earnings before interest & taxes (EBIT) 811
Interest expense 67
Taxable income 744
Tax 260
Minority interest 10
Net income 474
Dividends 107
Addition to retained earnings 367
Explanation / Answer
Table 18.11 gives abbreviated balance sheets and income statements for Estée Lauder Companies. Calculate the following ratios: a. Return on assets. b. Operating profit margin. c. Sales- to- assets ratio. d. Inventory turnover. e. Debt– equity ratio. f. Current ratio. g. Quick ratio 18-4. Look again at Table 18.11 . At the end of fiscal 2008 Estée Lauder had 195 million shares outstanding 19 with a share price of $ 45.50. The company’s weighted- average cost of capital was about 10%. Calculate. a. Market value added. b. Market- to- book ratio. c. Economic value added. d. Return on capital. Assets Balance Sheet End of year Start of year Current assets: Cash and marketable securities 402 254 Accounts receivable 1039 861 Inventories 987 856 Other current assets 360 269 Total current assets 2787 2239 Fixed assets: Tangible fixed assets Property, plant, and equipment 2394 2113 Less accumulated depreciation 1351 1232 Net tangible fixed assets 1043 881 Long- term investments 24 22 Other long- term assets 1157 984 Total assets 5011 4126 Liabilities and Shareholders’ Equity Current liabilities: Debt due for repayment 119 60 Accounts payable 1581 1440 Total current liabilities 1699 1501 Long- term debt 1078 1028 Other long- term liabilities 581 398 Total liabilities 3358 2927 Total shareholders' equity 1653 1199 Total liabilities & shareholders’ equity 5011 4126 Income statement End of year Net sales 7,911 Cost of goods sold 1,997 Selling, general, administrative expenses 4,852 Depreciation 251 Earnings before interest & taxes (EBIT) 811 Interest expense 67 Taxable income Tax 744 Minority interest 10 Net income 474 Dividends 107 Addition to retained earnings 367
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