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Lan & Chen Technologies: Income Statements for Year Ending December 31 (Thousands of Dollars) 2010 2009 Sales $945,000 $900,000 Expenses excluding depreciation and amortization 812,700

Lan & Chen Technologies: Income Statements for Year Ending December 31

(Thousands of Dollars) 2010 2009
Sales $945,000 $900,000
Expenses excluding depreciation and amortization 812,700 774,000
EBITDA $132,300 $126,000
Depreciation and amortization 33,100 31,500
EBIT $99,200 $94,500
Interest Expense 10,470 8,600
EBT $88,730 $85,900
Taxes (40%) 35,492 34,360
Net income $53,238 $51,540
Common dividends $43,300 $41,230
Addition to retained earnings $9,938 $10,310
Lan & Chen Technologies: December 31 Balance Sheets
(Thousands of Dollars)
Assets 2010 2009
Cash and cash equivalents $47,250 $45,000
Short-term investments 3,800 3,600
Accounts Receivable 283,500 270,000
Inventories 141,750 135,000
Total current assets $476,300 $453,600
Net fixed assets 330,750 315,000
Total assets $807,050 $768,600
Liabilities and equity
Accounts payable $94,500 $90,000
Accruals 47,250 45,000
Notes payable 26,262 9,000
Total current liabilities $168,012 $144,000
Long-term debt 94,500 90,000
Total liabilities $262,512 $234,000
Common stock 444,600 444,600
Retained Earnings 99,938 90,000
Total common equity $544,538 $534,600
Total liabilities and equity $807,050 $768,600
Key Input Data
Tax rate 40%
Net operating working capital
2010 NOWC = Operating current assets - Operating current liabilities
2010 NOWC = -
2010 NOWC =
2009 NOWC = Operating current assets - Operating current liabilities
2009 NOWC = -
2009 NOWC =
Total net operating capital
2010 TOC = NOWC + Fixed assets
2010 TOC = +
2010 TOC =
2009 TOC = NOWC + Fixed assets
2009 TOC = +
2009 TOC =
Investment in total net operating capital
2010 2009
2010 Inv. In TOC = TOC - TOC
2010 Inv. In TOC = -
2010 Inv. In TOC =
Net operating profit after taxes
2010 NOPAT = EBIT x ( 1 - T )
2010 NOPAT = x
2010 NOPAT =
Free cash flow
2010 FCF = NOPAT - Net investment in operating capital
2010 FCF = -
2010 FCF =
Return on invested capital
2010 ROIC = NOPAT / Total net operating capital
2010 ROIC = /
2010 ROIC =
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 8%. Calculate EVA and MVA for the most recent year.
Additional Input Data
Stock price per share $65.00
# of shares (in thousands) 15,000
After-tax cost of capital 8.0%
Market Value Added
MVA = Stock price x # of shares - Total common equity
MVA = x -
MVA = -
MVA =
Economic Value Added
EVA = NOPAT - (Operating Capital x After-tax cost of capital)
EVA = - x
EVA = -
EVA =
Joshua & White Technologies: December 31 Balance Sheets
(Thousands of Dollars)
Assets 2010 2009
Cash and cash equivalents $21,000 $20,000
Short-term investments 3,759 3,240
Accounts Receivable 52,500 48,000
Inventories 84,000 56,000
Total current assets $161,259 $127,240
Net fixed assets 218,400 200,000
Total assets $379,659 $327,240
Liabilities and equity
Accounts payable $33,600 $32,000
Accruals 12,600 12,000
Notes payable 19,929 6,480
Total current liabilities $66,129 $50,480
Long-term debt 67,662 58,320
Total liabilities $133,791 $108,800
Common stock 183,793 178,440
Retained Earnings 62,075 40,000
Total common equity $245,868 $218,440
Total liabilities and equity $379,659 $327,240
Joshua & White Technologies December 31 Income Statements
(Thousands of Dollars)
2010 2009
Sales $420,000 $400,000
Expenses excluding depr. and amort. 327,600 320,000
EBITDA $92,400 $80,000
Depreciation and Amortization 19,660 18,000
EBIT $72,740 $62,000
Interest Expense 5,740 4,460
EBT $67,000 $57,540
Taxes (40%) 26,800 23,016
Net Income $40,200 $34,524
Common dividends $18,125 $17,262
Addition to retained earnings $22,075 $17,262
Other Data 2010 2009
Year-end Stock Price $90.00 $96.00
# of shares (Thousands) 4,052 4,000
Lease payment (Thousands of Dollars) $20,000 $20,000
Sinking fund payment (Thousands of Dollars) $0 $0
Ratio Analysis 2010 2009 Industry Avg
Liquidity Ratios
Current Ratio 2.58
Quick Ratio 1.53
Asset Management Ratios
Inventory Turnover 7.69
Days Sales Outstanding 47.45
Fixed Assets Turnover 2.04
Total Assets Turnover 1.23
Debt Management Ratios
Debt Ratio 32.1%
Times-interest-earned ratio 15.33
EBITDA coverage ratio 4.18
Profitability Ratios
Profit Margin 8.86%
Basic Earning Power 19.48%
Return on Assets 10.93%
Return on Equity 16.10%
Market Value Ratios
Earnings per share NA
Price-to-earnings ratio 10.65
Cash flow per share NA
Price-to-cash flow ratio 7.11
Book Value per share NA
Market-to-book ratio 1.72
a. Has Joshua & White's liquidity position improved or worsened? Explain.
b. Has Joshua & White's ability to manage its assets improved or worsened? Explain.
c. How has Joshua & White's profitability changed during the last year?
d. Perform an extended Du Pont analysis for Joshua & White for 2008 and 2009.
ROE = PM x TA Turnover x Equity Multiplier
2010
2009

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