Computer Analytic Technology Systems (CATS) Corporation is a manufacturer of computer components. CATS had recently doubled its plant capacity, opened new sales offices outside its home territory, and launched an expensive advertising campaign. You have been hired as a consultant and have been asked to answer each question below. Be sure to show all calculations and state any assumptions that you make (though I am not sure you need to make any). Financial statements and other miscellaneous data are provided below.

H) Estimate EVA for CATS for 20Y3 and 20Y4. Assume the after-tax cost of capital (WACC) was 10% in both years.

INCOME STATEMENTS FOR CATS Sales Cost of goods sold (excluding depreciation) Other expenses Depreciation and amortization Total operating costs EBIT Interest expense Pre-tax earnings Taxes (40%) Net income 2013 $ 3,432,000 2,864,000 340,000 18,900 $3,222,900 $ 209,100 62,500 $ 146,600 58,640 $ 87,960 2014 $5,834,400 4,980,000 720,000 116,960 $ 5,816,960 17,440 176,000 ($ 158,560) (63,424) ($ 95,136) ADDITIONAL DATA $ $ Stock price Shares outstanding Earnings per share (EPS) Dividends per share (DPS) Tax rate 2013 8.50 100,000 0.880 0.220 40% 2014 6.00 100,000 0.951 0.110 40% $ $ $ ta BALANCE SHEETS FOR CATS 2013 2014 $ 9,000 48,600 351,200 715,200 $ 1,124,000 491,000 146,200 $ 344,800 $ 1,468,800 7,282 20,000 632,160 1,287,360 $ 1,946,802 1,202,950 263,160 $ 939,790 $ 2,886,592 Assets: Cash Short-term investments Accounts receivable Inventories Total current assets Gross fixed assets Less: Accumulated depreciation Net fixed assets Total assets Liabilities and Equity: Accounts payable Notes payable Accruals Total current liabilities Long-term debt Common stock (100,000 shares) Retained earnings Total equity Total liabilities and equity $ 145,600 200,000 136,000 $ 481,600 323,432 460,000 203,768 $ 663,768 $ 1,468,800 $ 324,000 720,000 284,960 $ 1,328,960 1,000,000 460,000 97,632 $ 557,632 $ 2,886,592