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    Nov 6, 2010, 10:30 AM
    Lan & Chen Technologies: Income Statements for Year Ending December 31
    Chapter 2. 2-15

    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 =
    Hello,

    Please help
    I really have no idea n how to figure out the net operating working capital, total net operating capital, net operating profit after taxes, free cash flow and return on investment capital for 2010

    Thanks so much

    Chapter 2. 2-15

    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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