11. The calculation of a firm's Market Value Added (MVA) and EconomicValue Added (EVA) Rafael, your newly appointed boss, has tasked you with evaluating the following financial data for Atherton Corp. to determine how Atherton's value has changed over the past year. The investment firm for which you work will make a positive (or "buy") recommendation to its investing clients if Atherton's value has increased over the past year, a neutral (or "hold") recommendation if the value has remained constant, or a negative (or "sell") recommendation if the value has decreased. He has recommended that you use several metrics to ascertain how the firm's value has changed, and he has provided you with the following income statement and balance sheet. Atherton Corp. Income Statement January 1 - December 31, Year 2 Year 2 Year 1 Sales Expenses? $3,150,000 2,520,000 $3,000,000 2,460,000 $540,000 EBITDA $630,000 Depreciation and amortization expense 110,250 105,000 EBIT $519,750 $435,000 Interest expense 94,500 75,000 $360,000 EBT $425,250 170,100 Tax expense (40%) 144,000 Net income $255,150 $216,000 $153,090 $129,600 Common dividends Addition to retained earnings 1Excludes depreciation and amortization $102,060 $86,400 Atherton Corp. Balance Sheet December 31, Year 2 Assets: Year 2 Year 1 $239,400 $171,000 Cash and cash equivalents Receivables 798,000 570,000 997,500 Inventory 1,396,500 $2,433,900 $1,738,500 1,556,100 1,111,500 $2,850,000 $3,990,000 Current assets Net fixed assets Total current assets Liabilities and Equity: Accounts payable Accruals Notes payable Total current liabilities $598,500 $427,500 389,025 277,875 837,900 598,500 $1,825,425 $1,303,875 Long-term debt 768,075 548,625 $2,593,500 $1,852,500 279,300 199,500 1,117,200 798,000 Total liabilities Common stock ($1 par) Retained earnings Total equity Total liabilities and equity Shares outstanding Weighted average cost of capital $1,396,500 $997,500 $3,990,000 $2,850,000 279,300 199,500 7.98% 7.30% To facilitate your analysis, complete the following table, and use the results to answer the related questions. (Note: Round all percentage change answers to two decimal places. If a dollar value is below $100, round your answer to two decimal places. If your answer is negative use a minus (-) sign.) Company Growth and Performance Metrics Metric Year 2 Year 1 Percentage Change General Metrics Sales $3,150,000 $3,000,000 Net income $255,150 $216,000 % $ $321,000 % $1,446,375 $ % $ $1.08 % $0.55 $ % Net cash flow (NCF) Net operating working capital (NOWC) Earnings per share (EPS) Dividends per share (DPS) Book value per share (BVPS) Cash flow per share (CFPS) Market price per share MVA Calculation $ $5.00 0.00% $ -18.63% $21.23 $19.75 % Market value of equity 50.49% Book value of equity $1,396,500 $997,500 % $ $2,942,625 % Market Value Added (MVA) EVA Calculation Net operating profit after-tax (NOPAT) Investor-supplied operating capital Weighted average cost of capital $311,850 $ % $ $ 40.00% 7.98% 7.30% Dollar cost of capital $ $ 53.04% % % -14.63% Return on invested capital (ROIC) Economic Value Added (EVA) $72,360 $ % 11. The calculation of a firm's Market Value Added (MVA) and EconomicValue Added (EVA) Rafael, your newly appointed boss, has tasked you with evaluating the following financial data for Atherton Corp. to determine how Atherton's value has changed over the past year. The investment firm for which you work will make a positive (or "buy") recommendation to its investing clients if Atherton's value has increased over the past year, a neutral (or "hold") recommendation if the value has remained constant, or a negative (or "sell") recommendation if the value has decreased. He has recommended that you use several metrics to ascertain how the firm's value has changed, and he has provided you with the following income statement and balance sheet. Atherton Corp. Income Statement January 1 - December 31, Year 2 Year 2 Year 1 Sales Expenses? $3,150,000 2,520,000 $3,000,000 2,460,000 $540,000 EBITDA $630,000 Depreciation and amortization expense 110,250 105,000 EBIT $519,750 $435,000 Interest expense 94,500 75,000 $360,000 EBT $425,250 170,100 Tax expense (40%) 144,000 Net income $255,150 $216,000 $153,090 $129,600 Common dividends Addition to retained earnings 1Excludes depreciation and amortization $102,060 $86,400 Atherton Corp. Balance Sheet December 31, Year 2 Assets: Year 2 Year 1 $239,400 $171,000 Cash and cash equivalents Receivables 798,000 570,000 997,500 Inventory 1,396,500 $2,433,900 $1,738,500 1,556,100 1,111,500 $2,850,000 $3,990,000 Current assets Net fixed assets Total current assets Liabilities and Equity: Accounts payable Accruals Notes payable Total current liabilities $598,500 $427,500 389,025 277,875 837,900 598,500 $1,825,425 $1,303,875 Long-term debt 768,075 548,625 $2,593,500 $1,852,500 279,300 199,500 1,117,200 798,000 Total liabilities Common stock ($1 par) Retained earnings Total equity Total liabilities and equity Shares outstanding Weighted average cost of capital $1,396,500 $997,500 $3,990,000 $2,850,000 279,300 199,500 7.98% 7.30% To facilitate your analysis, complete the following table, and use the results to answer the related questions. (Note: Round all percentage change answers to two decimal places. If a dollar value is below $100, round your answer to two decimal places. If your answer is negative use a minus (-) sign.) Company Growth and Performance Metrics Metric Year 2 Year 1 Percentage Change General Metrics Sales $3,150,000 $3,000,000 Net income $255,150 $216,000 % $ $321,000 % $1,446,375 $ % $ $1.08 % $0.55 $ % Net cash flow (NCF) Net operating working capital (NOWC) Earnings per share (EPS) Dividends per share (DPS) Book value per share (BVPS) Cash flow per share (CFPS) Market price per share MVA Calculation $ $5.00 0.00% $ -18.63% $21.23 $19.75 % Market value of equity 50.49% Book value of equity $1,396,500 $997,500 % $ $2,942,625 % Market Value Added (MVA) EVA Calculation Net operating profit after-tax (NOPAT) Investor-supplied operating capital Weighted average cost of capital $311,850 $ % $ $ 40.00% 7.98% 7.30% Dollar cost of capital $ $ 53.04% % % -14.63% Return on invested capital (ROIC) Economic Value Added (EVA) $72,360 $ %