Laiho Industries’ 2004 and 2005 balance sheets (in thousands of dollars) are shown below:

a. Sales for 2005 were $455,150,000, and EBITDA was 15 percent of sales. Furthermore, depreciation was 11 percent of net fixed assets, interest was $8,575,000, the corporate tax rate was 40 percent, and Laiho pays 40 percent of its net income out in dividends. The firm has no amortization expense. Given this information, construct the 2005 income statement.

b. Construct the statement of retained earnings for the year ending December 31, 2005, and the 2005 statement of cash flows.

c. Calculate net working capital and net operating working capital. What are the differences in these two measures?

d. Calculate total operating capital, NOPAT, operating cash flow, and free cash flow for 2005.

e. Calculate the 2005 MVA. There were 10 million shares outstanding and the year-end closing price was $17.25 per share.

f. If Laiho increased its dividend payout ratio, what effect would this have on its corporate taxes paid? What effect would this have on the taxes paid by the company’s shareholders?

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2004 2005 $ 89,725 Cash $102,850 103,365 Accounts receivable 85,527 Inventories 38,444 $244,659 67,165 $311,824 34,982 $210,234 42,436 $252,670 Total current assets Net fixed assets Total assets $ 30,761 30,477 $ 23,109 Accounts payable Accruals 22,656 Notes payable 16,717 $ 77,955 76,264 $154,219 100,000 14,217 $ 59,982 63,914 $123,896 90,000 Total current liabilities Long-term debt Total liabilities Common stock Retained earnings Total common equity Total liabilities and equity 57,605 $157,605 $311,824 38,774 $128,774 $252,670