a. Using the financial statements shown below, calculate net operating working capital, total net operating capital, net operating profit after taxes, free cash flow, and return on invested capital for the most recent year. The federal-plus-state tax rate is 25%. Lan & Chen Technologies: Income Statements for Year Ending December 31 (Millions of dollars) 2020 Sales $945,000 Expenses excluding depreciation and amortization 812,700 EBITDA $132,300 Depreciation and amortization 33,100 EBIT $99,200 Interest Expense 10,400 EBT $88,800 Taxes (25%) 22,200 Net income $66,600 2019 $900,000 774,000 $126,000 31,500 $94,500 8,900 $85,600 21,400 $64,200 Common dividends Addition to retained earnings $43,300 $23,300 $41,230 $22,970 Lan & Chen Technologies: December 31 Balance Sheets (Millions of Dollars) Assets Cash and cash equivalents Short-term investments 2019 2020 $47,250 3,800 283,500 141,750 $45,000 3,600 270,000 135,000 Accounts Receivable Inventories Total current assets Net fixed assets $476,300 330,750 $807,050 $453,600 315,000 $768,600 Total assets Liabilities and equity Accounts payable Accruals Notes payable Total current liabilities Long-term debt Total liabilities Common stock Retained Earnings Total common equity Total liabilities and equity $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 Key Input Data Tax rate 25% Net operating working capital (NOWC) Operating current 2020 NOWC = assets 2020 NOWC = 2020 NOWC = Operating current liabilities Operating current assets Operating current liabilities 2019 2019 2019 NOWC = NOWC = NOWC = + Fixed assets Total net operating capital (TNOC) 2020 TNOC = NOWC 2020 TNOC = 2020 TNOC = + NOWC + Fixed assets 2019 2019 2019 TNOC = TNOC = TNOC = + Investment in total net operating capital 2020 2020 nv. In TOC = TNOC 2020 nv. In TOC = 2020 nv. In TOC = 2019 TNOC EBIT Net operating profit after taxes 2020 NOPAT = 2020 NOPAT 2020 NOPAT = (1-T) X X NOPAT Investment in total net operating capital Free cash flow 2020 2020 2020 FCF = FCF = FCF = NOPAT Return on invested capital 2020 ROIC = 2020 ROIC = 2020 ROIC = I Total net operating capital / b. Assume that there were 15 million shares outstanding at the end of the year, the year-end closing stock price was $65 per share, and the after-tax cost of capital was 10%. Calculate EVA and MVA for the most recent year. Additional Input Data Stock price per share # of shares (in thousands) After-tax cost of capital $65.00 15,000 10.0% # of shares Total common equity Market Value Added MVA = Stock price MVA = MVA = MVA = (Operating Capit After-tax cost of capital) Economic Value Added EVA = NOPAT EVA = EVA = EVA =
