Asher, your newly appointed boss, has tasked you with evaluating the following financial data for Atherton Corp. to determine how Atherton'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 Atherton's value has increased over the past year, a neutral (or "hold') recommendation if the value has remained constant, or a negative (or "sell") recommendation if 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. Atherton Corp. Income Statement January 1 - December 31, Year 2 Year 2 Sales $6,900,000 Expenses 1 5,520,000 EBITDA 1,380,000 Depreciation and amortization expense 241,500 EBIT 1,138,500 Interest expense 207,000 EBT 931,500 Tax expense (40%) 372,600 Net income $558,900 Year 1 $6,000,000 4,920,000 1,080,000 210,000 870,000 150,000 720,000 288,000 $432,000 Year 1 $342,000 1,140,000 1,995,000 3,477,000 2,223,000 $5,700,000 Atherton Corp. Balance Sheet December 31, Year 2 Assets: Year 2 Cash and cash equivalents $427,500 Receivables 1,425,000 Inventory 2,493,750 Current assets 4,346,250 Net fixed assets 2,778,750 Total assets $7,125,000 Liabilities and Equity: Accounts payable $1,068,750 Accruals 694,688 Notes payable 1,496,250 Total current liabilities 3,259,688 Long-term debt 1,371,563 Total liabilities 4,631,250 Common stock ($1 par) 498,750 Retained earnings 1,995,000 Total equity 2,493,750 Total debt and equity $7,125,000 Common dividends Addition to retained earnings $335,340 $223,560 $259,200 $172,800 $855,000 555,750 1,197,000 2,607,750 1,097,250 3,705,000 399,000 1,596,000 1,995,000 $5,700,000 1 Excludes depreciation and amortization 1,99 Shares outstanding Weinhted average cost of canital 498,750 7 98% 399,000 7 30% 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 Percentage Change Using the change in Atherton's EVA as the decision criterion, which type of investment recommendation should you make to your clients? Metric Year 1 Year 2 General Metrics $6,900,000 $558,900 Sales O A buy recommendation O A hold recommendation O A sell recommendation $6,000,000 $432,000 $642,000 Net income Net cash flow (NCF) Net operating working capital (NOWC) $2,582,812 | Which of the following statements are correct? Check all that apply. $1.08 1 [ $0.67 0 Earnings per share (EPS) Dividends per share (DPS) Book value per share (BVPS) Cash flow per share (CFPS) Market price per share $5.00 0.00% 0.00% $19.75 $22.22 MVA Calculation 40.63% Market value of equity Book value of equity Market Value Added (MVA) $1,995,000 $5,885,250 $2,493,750 7 EVA Calculation $683,100 An increase in the number of common shares outstanding must increase the market value of the firm's equity. O Other things remaining constant, Atherton's EVA will increase when its ROIC exceeds its WACC. For any given year, one way to compute Atherton's EVA is as the difference between its NOPAT (such as $522,000) and the product of its operating capital ($4,289,250) and its weighted average cost of capital ($7.30). O Atherton's NCF is calculated by adding its annual depreciation and amortization expense to the corresponding year's EBITDA. The percentage change in Atherton's MVA indicates that its management has increased the firm's value. 25.00% 7.98% 7.30% 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) 36.64% 4.68% $255,210