4 5 a. Using the financial statements shown below, calculate net operating working capital, total net 6 operating capital, net operating profit after taxes, free cash flow, and return on invested capital for the 7 most recent year. The federal-plus-state tax rate is 25%. 8 9 Lan & Chen Technologies: Income Statements for Year Ending December 31 10 (Millions of Dollars) 2021 2020 11 Sales $945,000 $900,000 12 Expenses excluding depreciation and amortization 812,700 774,000 13 EBITDA $132,300 $126,000 14 Depreciation and amortization 33,100 31,500 15 EBIT $99,200 $94,500 16 Interest Expense 10,400 8,900 17 EBT $88,800 $85,600 18 Taxes (25%) 22,200 21,400 19 Net income $66,600 $64,200 $43,300 $23,300 $41,230 $22,970 20 Common dividends 22 Addition to retained earnings 23 24 Lan & Chen Technologies: December 31 Balance Sheets 25 Millions of Dollars) 26 Assets 27 Cash and cash equivalents 28 Short-term investments 29 Accounts Receivable 30 Inventories 31 Total current assets 32 Net fixed assets 2021 $47,250 3,800 283,500 141,750 $476,300 330,750 $807,050 2020 $45,000 3,600 270,000 135,000 $453,600 315,000 $768,600 33 Total assets 34 $94,500 47,250 17,400 $159,150 90,000 $249, 150 $444,600 113,300 $557,900 $807,050 $90,000 45,000 9,000 $144,000 90,000 $234,000 $444,600 90,000 $534,600 $768,600 25% 34 35 Liabilities and equity 36 Accounts payable 37 Accruals 38 Notes payable 39 Total current liabilities 40 Long-term debt 41 Total liabilities 42 Common stock 43 Retained Earnings 44 Total common equity 45 Total liabilities and equity 46 47 Key Input Data 48 Tax rate 49 50 Net operating working capital (NOWC) Operating 51 2021 NOWC = current assets 52 2021 NOWC = $472,500 53 2021 NOWC = $330,750 54 Operating 55 2020 NOWC = current assets 56 2020 NOWC = 57 2020 NOWC = 58 59 Total net operating capital (TNOC) 60 2021 TNOC = NOWC 61 2021 TNOC = 62 2021 TNOC = 63 64 2020 TNOC = NOWC 65 2020 TNOC = 66 2020 TNOC = 67 Operating current liabilities $141,750 Operating current liabilities + Fixed assets + + Fixed assets + | 67 68 Investment in total net operating capital 69 2021 2020 70 2021 Inv. In TOC = TNOC TNOC 71 2021 Inv. In TOC = 72 2021 Inv. In TOC = 73 74 Net operating profit after taxes 75 2021 NOPAT = EBIT (1-T) 76 2021 NOPAT = 77 2021 NOPAT = 78 79 Free cash flow 80 2021 FCF = NOPAT Investment in total net operating capital 81 2021 FCF = 82 2021 FCF = 83 84 Return on invested capital 85 2021 ROIC = NOPAT 1 Total net operating capital 86 2021 ROIC = 87 2021 ROIC = 88 89 b. Assume that there were 15 million shares outstanding at the end of the year, the year-end closing 90 stock price was $65 per share, and the after-tax cost of capital was 10%. Calculate EVA and MVA for the 91 most recent year. 92 93 Additional Input Data 94 Stock price per share $65.00 95 # of shares (in thousands) 15,000 96 After-tax cost of capital 10.0% 97 98 Market Value Added 99 MVA = Stock price # of shares Total common equity 100 MVA = 101 MVA = 102 MVA = 103 104 Economic Value Added 105 EVA = NOPAT (Operating Capital X After-tax cost of capital) 106 EVA = 107 EVA = 108 EVA = 109