FREE CASH FLOW Bailey Corporation’s financial statements (dollars and shares are in millions) are provided here.

Balance Sheets as of December 31 2014 2013 Assets Cash and equivalents $ 14,000 $ 13,000 Accounts receivable 30,000 25,000 Inventories 28,125 21,000 Total current assets $ 72,125 $ 59,000 Net plant and equipment 50,000 47,000 Total assets $122,125 $106,000 Liabilities and Equity Accounts payable $ 10,800 $ 9,000 Accruals 7,600 6,000 Notes payable 6,700 5,150 Total current liabilities $ 25,100 $ 20,150 Long-term bonds 15,000 15,000 Total liabilities $ 40,100 $ 35,150 Common stock (5,000 shares) 50,000 50,000 Retained earnings 32,025 20,850 Common equity $ 82,025 $ 70,850 Total liabilities and equity $122,125 $106,000.

Income Statement for Year Ending December 31, 2014 Sales $214,000 Operating costs excluding depreciation and amortization 170,000 EBITDA $ 44,000 Depreciation & amortization 5,000 EBIT $ 39,000 Interest 1,750 EBT $ 37,250 Taxes (40%) 14,900 Net income $ 22,350 Dividends paid $ 11,175

a. What was net operating working capital for 2013 and 2014?

b. What was Bailey’s 2014 free cash flow?

c. Construct Bailey’s 2014 statement of stockholders’ equity.

d. What was Bailey’s 2014 EVA? Assume that its after-tax cost of capital is 10%.

e. What was Bailey’s MVA at year-end 2014? Assume that its stock price at December 31, 2014 was $20.AppendixLO1