Rhodes Corporation: Income Statements for Year Ending December 31 (Millions of Dollars) 2018 2017 Sales $9,750.0 $7,500.0 Operating costs excluding depreciation 8,044.0 6,375.0 Depreciation and amortization 224.0 195.0 Earnings before interest and taxes $1,482.0 $930.0 Less Interest 210.0 161.0 Pre-tax income $1,272.0 $769.0 Taxes (40%) 508.8 307.6 Net income available to common stockholders $763.2 $461.4 Common dividends $687.0 $369.0 Rhodes Corporation: Balance Sheets as of December 31 (Millions of Dollars) 2018 2017 Assets Cash $104.0 $83.0 Short-term investments 49.0 38.0 Accounts receivable 1,350.0 1,125.0 Inventories 1,403.0 1,275.0 Total current assets $2,906.0 $2,521.0 Net plant and equipment 2,243.0 1,950.0 Total assets $5,149.0 $4,471.0 Liabilities and Equity Accounts payable $495.0 $450.0 Accruals 878.0 675.0 Notes payable 195.0 150.0 Total current liabilities $1,568.0 $1,275.0 Long-term debt 1,950.0 1,500.0 $3,518.0 $2,775.0 Common stock 1,415.8 1,557.0 Retained earnings 215.2 139.0 Total common equity $1,631.0 $1,696.0 Total liabilities and equity $5,149.0 $4,471.0 Using Rhodes Corporation's financial statements (shown above), answer the following questions Total liabilities Ch 06: Assignment - Accounting for Financial Management Common stock 1,415.8 1,557.0 Retained earnings 215.2 139.0 Total common equity $1,631.0 $1,696.0. Total ilabilities and equity $5,149.0 $4,471.0 Using Rhodes Corporation's financial statements (shown above), answer the following questions. a. What is the net operating profit after taxes (NOPAT) for 2018? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000. Round your answer to one decimal place. $ million b. What are the amounts of net operating working capital for both years? Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number. 2018: $ million 2017: $ million c. What are the amounts of total net operating capital for both years? Enter your answers in millions. For example, an answer of $1 million should be entered as 1, not 1,000,000. Round your answers to the nearest whole number. 2018: $ million million 2017: $ d. What is the free cash flow for 2018? Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1.2, not 1,200,000, Cash outflow, if any, should be indicated by a minus sign. Round your answer to one decimal place. million e. What is the ROIC for 20187 Round your answer to two decimal places. t. How much of the FCF did Rhodes use for each of the following purposes: after-tax interest, net debt repayments, dividends, net stock repurchases, and net purchases of short-term investments? (Hint: Remember that a net use can be negative.) Enter your answer in millions. For example, an answer of $1.2 million should be entered as 1. not 1,200,000. Round your answers to one decimal place. After-tax interest payment $ million $ Reduction (increase) in debt Payment of dividends million million million Repurchase (Issue) stock. million Purchase (Sale) of short-term investments S $ Accounting for Financial Management: EVA/MVA The financial statements reflect historical data, but managers' performance must be evaluated on the basis of -Select- have developed two measures: Market Value Added (MVA) and Economic Value Added (EVA). values. To provide this information, financial analysts Market Value Added represents the difference between the money stockholders have invested in the firm versus the cash they could receive if the firm were sold. The equation for MVA is: MVA (Shares outstanding x Stock price) - Total common equity a firm's MVA, the better the job management is doing for its shareholders. Shareholder wealth is maximized when this difference is Select The select Economic Value Added is sometimes called T-Select- , and it is closely related to MVA. The equation for EVA is: EVA NOPAT (Total net operating capital) (WACC) EVA differs from invested capital is equal to the sum of notes payable, long-term debt, and total common equity. EVA differs from Select because EVA has a deduction for the cost of equity. Positive EVA on an annual basis helps ensure that MVA is also positive. [select can be determined for divisions as well as for the firm as a whole, so it is useful for establishing reasonable compensation for divisional managers as well as top company officers. Quantitative Problem: Rosnan Industries 2018 and 2017 balance sheets and income statements are shown below. All of the balance of Cash and Equivalents is an operating asset. Balance Sheets: 2018 2017 Cash and equivalents Accounts receivable Inventories Total current assets Net plant and equipment Total assets Accounts payable Accruals Notes payable Long-term debt Common stock Total current liabilities $100 275 375 $750 2,000 $2,750 $150 75 150 $375 450 1.225 $85 200 250 $635 1,490 $2,125 $85 50 75 $210. 290 1.225 mong for Pinancial Management 700 $2,750 Income Statements: Retained earnings Total liabilities and equity Sales $1,500 Operating costs excluding depreciation 1,000 EBITDA $500 Depreciation and amortization 75 EBIT $425 Interest 45 EBT $380 Taxes (40%) 152 Net income $228 Dividends paid $53 $48 Addition to retained earnings $300 $180 Shares outstanding 180 180 $20.83 $18.33 Price WACC 12.00% Using the financial statements above, what is Rosnan's 2018 market value added (MVA)? Do not round intermediate calculations. Round your answer to the nearest dollar. $ Using the financial statements given earlier, what is Rosnan's 2018 economic value added (EVA)? Do not round intermediate calculations. Round your answer to the nearest cent $ 2018 $2,000 1,250 $750 100 $650 62 $588 235 $353 400 $2,125 2017