[artley]

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 =