CHUO. ASSIM ACCOUNT OF Financial Management Western Gas & Electric Co. Income Statement January 1 - December 31, Year 2 Year 2 Sales $5,500,000 Expenses 4,400,000 EBITDA 1,100,000 Depreciation and amortization expense 192,500 EBIT 907,500 Interest expense 165,000 EBT 742,500 Tax expense (40%) 297,000 Net income 5445,500 Common dividends $267,300 Addition to retained earnings $178,200 Excludes depreciation and amortization Year 1 $5,000,000 4,100,000 900,000 175,000 725,000 125,000 600,000 240,000 Year 1 $285,000 950,000 1,662,500 2,897,500 1,852,500 $4,750,000 Western Gas & Electric Co. Balance Sheet December 31, Year 2 Assets: Year 2 Cash and cash equivalents $313,500 Receivables 1,045,000 Inventory 1,828,750 Current assets 3,187,250 Net fixed assets 2,037,750 Total assets $5,225,000 Liabilities and Equity: Accounts payable $783,750 Accruals 509,438 Notes payable 1,097,250 Total current liabilities 2,390,438 Long-term debt 1,005,813 Total liabilities 3,396,250 Common stock ($1 par) 365,750 Retained earnings 1,463,000 Total equity 1,828,750 Total debt and equity $5,225,000 $360,000 216,000 $144,000 $712,500 463,125 997,500 2,173,125 914,375 3,087,500 332,500 1,330,000 1,662,500 $4,750,000 Shares outstanding Weighted average cost of capital 365,750 7.98% 332,500 7.30% 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. Company Growth and Performance Metrics Using the change in Western G&E'S EVA as the decision MacBook Pro Company Growth and Performance Metrics Metric Year 1 Percentage Change Year 2 General Metrics $5,500,000 $445,500 Using the change in Western G&E's EVA as the decision Criterion, which type of investment recommendation should you make to your clients? A buy recommendation O A sell recommendation O A hold recommendation $5,000,000 $360,000 $535,000 $1,894,062 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 $1.08 0.00% $19.75 MVA Calculation Market value of equity Book value of equity Market Value Added (MVA) $1,828,750 $1,662,500 $4,904,375 Which of the following statements are correct? Check all that apply. Investor-supplied operating capital is recorded as accounts payable, accruals, and short-term Investments. Western GSE'S NCF is calculated by adding its annual interest expense to the corresponding year's net income. For any given year, one way to compute Western G&E'S EVA is as the difference between its NOPAT (such as $435,000) and the product of its operating capital (53,574,375) and its weighted average cost of capital ($7.30). Western GSE's net income is growing at a rate greater than its sales. This could imply that either its revenues are growing more quickly than its expenses or that management is being effective in managing its costs while achieving the reported growth in sales. Other things remaining constant, either event should increase the value of the firm. The percentage change in Western GSE'S EVA indicates that management has increased its EVA Calculation $544,500 10.0096 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) 7.98% 20.25% 13.80% $230,797 value MacBook Pro CHUO. ASSIM ACCOUNT OF Financial Management Western Gas & Electric Co. Income Statement January 1 - December 31, Year 2 Year 2 Sales $5,500,000 Expenses 4,400,000 EBITDA 1,100,000 Depreciation and amortization expense 192,500 EBIT 907,500 Interest expense 165,000 EBT 742,500 Tax expense (40%) 297,000 Net income 5445,500 Common dividends $267,300 Addition to retained earnings $178,200 Excludes depreciation and amortization Year 1 $5,000,000 4,100,000 900,000 175,000 725,000 125,000 600,000 240,000 Year 1 $285,000 950,000 1,662,500 2,897,500 1,852,500 $4,750,000 Western Gas & Electric Co. Balance Sheet December 31, Year 2 Assets: Year 2 Cash and cash equivalents $313,500 Receivables 1,045,000 Inventory 1,828,750 Current assets 3,187,250 Net fixed assets 2,037,750 Total assets $5,225,000 Liabilities and Equity: Accounts payable $783,750 Accruals 509,438 Notes payable 1,097,250 Total current liabilities 2,390,438 Long-term debt 1,005,813 Total liabilities 3,396,250 Common stock ($1 par) 365,750 Retained earnings 1,463,000 Total equity 1,828,750 Total debt and equity $5,225,000 $360,000 216,000 $144,000 $712,500 463,125 997,500 2,173,125 914,375 3,087,500 332,500 1,330,000 1,662,500 $4,750,000 Shares outstanding Weighted average cost of capital 365,750 7.98% 332,500 7.30% 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. Company Growth and Performance Metrics Using the change in Western G&E'S EVA as the decision MacBook Pro Company Growth and Performance Metrics Metric Year 1 Percentage Change Year 2 General Metrics $5,500,000 $445,500 Using the change in Western G&E's EVA as the decision Criterion, which type of investment recommendation should you make to your clients? A buy recommendation O A sell recommendation O A hold recommendation $5,000,000 $360,000 $535,000 $1,894,062 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 $1.08 0.00% $19.75 MVA Calculation Market value of equity Book value of equity Market Value Added (MVA) $1,828,750 $1,662,500 $4,904,375 Which of the following statements are correct? Check all that apply. Investor-supplied operating capital is recorded as accounts payable, accruals, and short-term Investments. Western GSE'S NCF is calculated by adding its annual interest expense to the corresponding year's net income. For any given year, one way to compute Western G&E'S EVA is as the difference between its NOPAT (such as $435,000) and the product of its operating capital (53,574,375) and its weighted average cost of capital ($7.30). Western GSE's net income is growing at a rate greater than its sales. This could imply that either its revenues are growing more quickly than its expenses or that management is being effective in managing its costs while achieving the reported growth in sales. Other things remaining constant, either event should increase the value of the firm. The percentage change in Western GSE'S EVA indicates that management has increased its EVA Calculation $544,500 10.0096 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) 7.98% 20.25% 13.80% $230,797 value MacBook Pro