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Taj, your newly appointed boss, has tasked you with evaluating the following financial data for Galaxy Corp. to determine how Galaxy's value has changed over the past year. The investment firm for which you work will make a positive (or "buy") recommendation to its investing clients if Galaxy's value has increased over the past year, a neutral (or "hold") recommendation the value has remained constant, or a negative (orel) recommendation the value has decreased. He has recommended that you use several metrics to ascertain how the firm's value has changed, and he has provided you with the following income statement and balance sheet. Galaxy Corp. Income Statement January 1 - December 31, Year 2 Year 2 Sales $2,362,500 Expenses 1,890,000 EBITDA 472,500 Depreciation and amortization expense 82,688 EBIT 389,812 Interest expense 70,875 EBT 318,937 Tax expense (40%) 127,575 Net income $191,362 Year 1 $128,250 427,500 748,125 1,303,875 833,625 $2,137,500 Galaxy Corp. Balance Sheet December 31, Year 2 Year 1 Assets: Year 2 $2,250,000 Cash and cash equivalents $141,075 1,845,000 Receivables 470.250 405,000 Inventory 822,938 78.750 Current assets 1,434,263 326,250 Net fixed assets 916,987 56,250 Total assets $2,351,250 270.000 Liabilities and Equity 100.000 Accounts payable $162,000 Acerul 229,247 Notes payable 493,763 $97,200 Total current abilities 1,075,698 $64,800 Longternett 452,616 Total liabilities 1,528,313 Common stock (51 per) 164,587 Retained earrings 658,350 Total equity Total debt and equity $2,351,250 Shares outstanding 164,587 Weighted average cost of capital 7.987 $320,625 208,400 448,875 977,000 Common dividends Addition to retained sarings Exdudes depreciation and amortation $114,817 576,545 149,625 598,500 74,125 $2,137,500 149,625 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 Metric Year 1 Percentage Change Year 2 General Metrics $2,362,500 $191,362 Using the change in Galaxy's EVA as the decision criterion, which type of investment recommendation should you make to your clients? A buy recommendation A sell recommendation A hold recommendation $2,250,000 $162,000 $240,750 $852,328 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 $1.0B $0.70 $5.00 0.00% $19.75 $20.74 MVA Calculation 15.51% Market value of equity Book value of equity Market Value Added (MVA) $822,937 $748,125 $2,206,969 Which of the following statements are correct? Check all that apply Galaxy's NCF is calculated by adding its annual depreciation and amortization expense to the corresponding year's EBITDA Galaxy's net income is growing at a rate greater than its soles. 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, ether event should increase the value of the firm Other things remaining constant, Galaxy's EVA will Increase when its ROIC exceeds its WACC An increase in the number of common shares outstanding must increase the market value of the firm's equity For any given year, one way to compute Galaxy's EVA Is as the difference between its NOPAT (such as $195,750) and the product of its operating capital (51,608,460) and its weighted average cost of capital ($7.30) EVA Calculation $233,887 10.00 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) 7.30% 20.25 8.63 $92,712