Alexis, 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. Atherton Corp. January 1- December 31, Year 2 Year Year Year Year $666,900 2,223,000 Assets: Cash and cash equivalents Receivables Inventory Year $513,000 1,710,000 2,992,500 5,215,500 3,334,500 $8,550,000 Sales $9,450,000 9,000,000 7,380,000 Expenses EBITDA 1,890,000 330,750 1,559,250 283,500 1,275,750 S10,300 765,A Depreciation and amortization expense 315,000 6,780,150 4,334,850 11,115,000 Net fixed assets Interest expense Liabilities and Equity Accounts payable $1,667,250 $1,282,500 Tax expense (40%) Net income 432,000 $648,000 $388,800 $259,200 1,083,713 2,334,150 5,085,113 2,139,638 Notes payable Common dividends Addition to retained eamings Excludes depreciation and amortization 1,795,500 3,911,625 1,645,875 5,557,500 598,500 $459,270 $306,180 Total current liabilities emm Total liabilities Common stock ($1 par) Retained eamings 3,112,200 Total equity Total debt and equity 11,115,000 $8,550,000 Shares outstanding Weighted average cost of capital 598,500 7.98% To facilitate your analysis, complete the following table, and use the results to answer the related questions. Round your percentage change answers to two decimal 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 Percentage Change Year General Metics A hold recommendation A buy recommendation 0 A sell recommendation Sales 9,450,000 9,000,000 $648,000 $963,000 3,099,375 4.76% | | 15.34% | $765,450 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 Which of the following statements are correct? Check all $4,029,187 The percentage change in Atherton's MVA indicates that its management has increased the firm's value. 0.00% 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 MVA Calculation 43.03% | D Market value of equity Book value of equity Market Value Added (MVA) $3,890,250 2,992,500 8,827,875 EVA Calculation 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) $935,550 30.00% Other things remaining constant, Atherton's EVA will increase when its ROIC exceeds its WACC. $268,486 Alexis, 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. Atherton Corp. January 1- December 31, Year 2 Year Year Year Year $666,900 2,223,000 Assets: Cash and cash equivalents Receivables Inventory Year $513,000 1,710,000 2,992,500 5,215,500 3,334,500 $8,550,000 Sales $9,450,000 9,000,000 7,380,000 Expenses EBITDA 1,890,000 330,750 1,559,250 283,500 1,275,750 S10,300 765,A Depreciation and amortization expense 315,000 6,780,150 4,334,850 11,115,000 Net fixed assets Interest expense Liabilities and Equity Accounts payable $1,667,250 $1,282,500 Tax expense (40%) Net income 432,000 $648,000 $388,800 $259,200 1,083,713 2,334,150 5,085,113 2,139,638 Notes payable Common dividends Addition to retained eamings Excludes depreciation and amortization 1,795,500 3,911,625 1,645,875 5,557,500 598,500 $459,270 $306,180 Total current liabilities emm Total liabilities Common stock ($1 par) Retained eamings 3,112,200 Total equity Total debt and equity 11,115,000 $8,550,000 Shares outstanding Weighted average cost of capital 598,500 7.98% To facilitate your analysis, complete the following table, and use the results to answer the related questions. Round your percentage change answers to two decimal 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 Percentage Change Year General Metics A hold recommendation A buy recommendation 0 A sell recommendation Sales 9,450,000 9,000,000 $648,000 $963,000 3,099,375 4.76% | | 15.34% | $765,450 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 Which of the following statements are correct? Check all $4,029,187 The percentage change in Atherton's MVA indicates that its management has increased the firm's value. 0.00% 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 MVA Calculation 43.03% | D Market value of equity Book value of equity Market Value Added (MVA) $3,890,250 2,992,500 8,827,875 EVA Calculation 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) $935,550 30.00% Other things remaining constant, Atherton's EVA will increase when its ROIC exceeds its WACC. $268,486