Keep the Highest: 35 11. The calculation of a firm's Market Value Added (MVA) and EconomicValue Added (EVA) Alexis, your newly appointed boss, has tasked you with evaluating the following financial data for Extensive E Extensive's value has changed over the past year. The investment firm for which you work will make a positiv investing clients if Extensive's value has increased over the past year, a neutral (or "hold") recommendation in negative (or "sell") recommendation if the value has decreased. He has recommended that you use several m has changed, and he has provided you with the following income statement and balance sheet. Extensive Enterprise Inc. Income Statement January 1 - December 31, Year 2 Sales Expenses! EBITDA Depreciation and amortization expense EBIT Interest expense EBT Tax expense (40%) Net income Common dividends Addition to retained earnings Excludes depreciation and amortization Year 2 $8,400,000 6,720,000 $1,680,000 294,000 $1,386,000 252,000 $1,134,000 Year 1 $8,000,000 6,560,000 $1,440,000 280,000 $1,160,000 200,000 $960,000 384,000 $576,000 453,600 $680,400 $345,600 $408,240 $272,160 $230,400 Extensive Enternrise Inc e to search Balance Sheet December 31, Year 2 Assets: Year 2 Year 1 Cash and cash equivalents Receivables Inventory Current assets $638,400 $456,000 2,128,000 1,520,000 3,724,000 2,660,000 $6,490,400 $4,636,000 4,149,600 2,964,000 $10,640,000 $7,600,000 Net fixed assets $1,596,000 1,037,400 2,234,400 $1,140,000 741,000 1,596,000 $3,477,000 $4,867,800 2,048,200 Total current assets Liabilities and Equity: Accounts payable Accruals Notes payable Total current liabilities Long-term debt Total liabilities Common stock ($1 par) Retained earnings Total equity Total liabilities and equity Shares outstanding Weighted average cost of capital 1,463,000 $4,940,000 $6,916,000 744,800 2,979,200 $3,724,000 532,000 2,128,000 $2,660,000 $7,600,000 532,000 $10,640,000 744,800 7.98% 7.30% % To facilitate your analysis, complete the following table, and use the results to answer the related questions. (Note: Round all percent answers to tivo decimal places. If a dollar value is below $100, round your answer to two decimal places. If your answer is negative u sign.) Company Growth and Performance Metrics Metric Year 2 Year 1 Percentage Change General Metrics Sales $8,400,000 $8,000,000 Net Income $680,400 5576,000 Net cash flow (NCF) $856,000 Net operating working capital (NOWC) $3,857,000 Earnings per share (EPS) $1.08 Dividends per share (DPS) $0.55 Book value per share (BVPS) $ $5.00 0.00% Cash flow per share (CFPS) -18.63% Market price per share $21.73 $19.75 9% $ 96 $ $ 96 $ 96 Metric Year 2 Year 1 Percentage Change MVA Calculation $ $ 54.04% Market value of equity Book value of equity Market Value Added (MVA) $3,724,000 $2,660,000 9 $ $7,847,000 Year 2 Year 1 Percentage Change $831,600 $ 96 $ $ 40.00% Metric 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) 7.98% 7.30% $ S 53.04% 96 9 -14.6396 $ 192,959 $ 96 Using the change in Extensive's EVA as the decision criterion, which type of investment recommendation should you make to your di Using the change in Extensive's EVA as the decision criterion, which type of investment recommendation should you make to your clients? O A sell recommendation A buy recommendation A hold recommendation Which of the following statements are correct? Check all that apply. For any given year, one way to compute Extensive's EVA is as the difference between its NOPAT and the product of its operating capital and its weighted average cost of capital The percentage change in Extensive's MVA indicates that its management has increased the firm's value An increase in the number of common shares outstanding must increase the market value of the firm's equity. The percentage change in Extensive's EVA indicates that management has decreased its value. Extensive's NCF is calculated by adding its annual interest expense to the corresponding year's net income