FINANCIAL STATEMENTS, CASH FLOW, AND TAXES Laiho Industries’ 2013 and 2014 balance sheets (in thousands of dollars) are shown.

2014 2013 Cash $102,850 $ 89,725 Accounts receivable 103,365 85,527 Inventories 38,444 34,982 Total current assets $244,659 $210,234 Net fixed assets 67,165 42,436 Total assets $311,824 $252,670 Accounts payable $ 30,761 $ 23,109 Accruals 30,477 22,656 Notes payable 16,717 14,217 Total current liabilities $ 77,955 $ 59,982 Long-term debt 76,264 63,914 Total liabilities $154,219 $123,896 Common stock 100,000 90,000 Retained earnings 57,605 38,774 Total common equity $157,605 $128,774 Total liabilities and equity $311,824 $252,670

a. Sales for 2014 were $455,150,000, and EBITDA was 15% of sales. Furthermore, depreciation and amortization were 11% of net fixed assets, interest was $8,575,000, the corporate tax rate was 40%, and Laiho pays 40% of its net income as dividends. Given this information, construct the firm’s 2014 income statement.

b. Construct the statement of stockholders’ equity for the year ending December 31, 2014, and the 2014 statement of cash flows.

c. Calculate 2013 and 2014 net operating working capital (NOWC) and 2014 free cash flow (FCF).

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

e. Assume that the firm’s after-tax cost of capital is 10 5%. What is the firm’s 2014 EVA?

f. Assume that the firm’s stock price is $22 per share and that at year-end 2014 the firm has 10 million shares outstanding. What is the firm’s MVA at year-end 2014?

AppendixLO1