12. The calculation of a firm's Market Value Added (MVA) and Economic Value Added (EVA Alex is your nev ly appointed boss has tasked you with evaluating the following financial data for Atherton Corp. to determine how Atherton's value has chnged 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. January 1-December 31, Year 2 December 31, Year 2 $9,450,000 9,000,000 7,380,000 1,620,000 315,000 1,305,000 225,000 1,080,000 $666,900 2,223,000 3,890,250 Sales Cash and cash equivalents Receivables $513 1,710,000 2,992,500 5,215,500 7,560,000 1,890,000 330,750 1,559,250 283,500 1,275,750 510,300 $765,450 EBITDA Depreciation and amortization expense assets Net fixed assets 4,334,850 $11,115,000 EBIT Interest expense $8,550,000 EBT Tax expense (40%) Net income Common dividends Addition to retained eamings Excludes depreciation and amortization Liabilities and Equity Accounts payable 1,667,250 1,282,500 833,625 1,795,500 3,911,625 1,645,875 1,083,713 2,334,150 5,085,11 2,139,638 7,224,750 778,050 3,112,200 5648,000 388,800 259,200 Notes payabl $459,270 180 Total current liabilities debt Total Common stock ($1 par) Retained eamings 5,557 598,500 2,394,000 2,992,500 $8,550,000 Total equity Total debt and equity 11,115 Shares outstanding Weighted average cost of capital 778,050 To facilitate your analysis, complete the following table, and use the results to answer the related questions. Round your percentage change answers to two places Using the change in Atherton's EVA as the decision criterion, which type of investment recommendation should you make to your clients? Company Growth and Performance Metrics Metric General Metnics O A buy Sales Net income 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 $9,450,000 ,000,000 $648,000 963,000 $765,450 A sell recommendation Which of the following statements are correct? Check all that apply $4,029,187 The percentage change in Atherton's MVA indicates that its management has increased the firm's value. An increase in the number of common shares outstanding must increase the market value of the firm's equity For any given year, one way to compute Atherton's EVA is as the difference between its NOPAT (such as $783,000) and the product of its operating capital ($6,433,875) and its weighted average cost of capital ($7.30) Atherton's NCF is calculated by adding its annual interest expense to the corresponding year's net income Other things remaining constant, Atherton's EVA will increase when its ROIC exceeds its WACC. $0.59 -12.42% $21.73 19.75 MVA Calculation Market value of equity Book value of equity Market Value Added (MVA) $3,890,250 2,992,500 $8,827,875 EVA Calculation 935,550 Net operating profit after-tax (NOPAT) Investor-supplied operating capital Weighted average cost of capital Dollar cost of capital Return on invested capital (ROIC) Economic Value Added (EVA) 30 .00% 7.98% 42.11% 8.05% $268,486 12. The calculation of a firm's Market Value Added (MVA) and Economic Value Added (EVA Alex is your nev ly appointed boss has tasked you with evaluating the following financial data for Atherton Corp. to determine how Atherton's value has chnged 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. January 1-December 31, Year 2 December 31, Year 2 $9,450,000 9,000,000 7,380,000 1,620,000 315,000 1,305,000 225,000 1,080,000 $666,900 2,223,000 3,890,250 Sales Cash and cash equivalents Receivables $513 1,710,000 2,992,500 5,215,500 7,560,000 1,890,000 330,750 1,559,250 283,500 1,275,750 510,300 $765,450 EBITDA Depreciation and amortization expense assets Net fixed assets 4,334,850 $11,115,000 EBIT Interest expense $8,550,000 EBT Tax expense (40%) Net income Common dividends Addition to retained eamings Excludes depreciation and amortization Liabilities and Equity Accounts payable 1,667,250 1,282,500 833,625 1,795,500 3,911,625 1,645,875 1,083,713 2,334,150 5,085,11 2,139,638 7,224,750 778,050 3,112,200 5648,000 388,800 259,200 Notes payabl $459,270 180 Total current liabilities debt Total Common stock ($1 par) Retained eamings 5,557 598,500 2,394,000 2,992,500 $8,550,000 Total equity Total debt and equity 11,115 Shares outstanding Weighted average cost of capital 778,050 To facilitate your analysis, complete the following table, and use the results to answer the related questions. Round your percentage change answers to two places Using the change in Atherton's EVA as the decision criterion, which type of investment recommendation should you make to your clients? Company Growth and Performance Metrics Metric General Metnics O A buy Sales Net income 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 $9,450,000 ,000,000 $648,000 963,000 $765,450 A sell recommendation Which of the following statements are correct? Check all that apply $4,029,187 The percentage change in Atherton's MVA indicates that its management has increased the firm's value. An increase in the number of common shares outstanding must increase the market value of the firm's equity For any given year, one way to compute Atherton's EVA is as the difference between its NOPAT (such as $783,000) and the product of its operating capital ($6,433,875) and its weighted average cost of capital ($7.30) Atherton's NCF is calculated by adding its annual interest expense to the corresponding year's net income Other things remaining constant, Atherton's EVA will increase when its ROIC exceeds its WACC. $0.59 -12.42% $21.73 19.75 MVA Calculation Market value of equity Book value of equity Market Value Added (MVA) $3,890,250 2,992,500 $8,827,875 EVA Calculation 935,550 Net operating profit after-tax (NOPAT) Investor-supplied operating capital Weighted average cost of capital Dollar cost of capital Return on invested capital (ROIC) Economic Value Added (EVA) 30 .00% 7.98% 42.11% 8.05% $268,486