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    Ch02 P21 Build A Model

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    Felipe Weuler
    The document provides financial statements for Lan & Chen Technologies for 2020 and 2019. It asks to calculate several metrics including net operating working capital, total net operating capital, net operating profit after taxes, free cash flow, return on invested capital, economic value added, and market value added for 2020. It provides the necessary financial data and additional inputs of stock price, number of shares, and after-tax cost of capital to calculate economic value added and market value added.

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    Ch02 P21 Build A Model

    Uploaded by

    Felipe Weuler
    89 views3 pages
    The document provides financial statements for Lan & Chen Technologies for 2020 and 2019. It asks to calculate several metrics including net operating working capital, total net operating capital, net operating profit after taxes, free cash flow, return on invested capital, economic value added, and market value added for 2020. It provides the necessary financial data and additional inputs of stock price, number of shares, and after-tax cost of capital to calculate economic value added and market value added.

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    Ch02 P21 Build a Model

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    The document provides financial statements for Lan & Chen Technologies for 2020 and 2019. It asks to calculate several metrics including net operating working capital, total net operating capital, net operating profit after taxes, free cash flow, return on invested capital, economic value added, and market value added for 2020. It provides the necessary financial data and additional inputs of stock price, number of shares, and after-tax cost of capital to calculate economic value added and market value added.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    89 views3 pages

    Ch02 P21 Build A Model

    Uploaded by

    Felipe Weuler
    The document provides financial statements for Lan & Chen Technologies for 2020 and 2019. It asks to calculate several metrics including net operating working capital, total net operating capital, net operating profit after taxes, free cash flow, return on invested capital, economic value added, and market value added for 2020. It provides the necessary financial data and additional inputs of stock price, number of shares, and after-tax cost of capital to calculate economic value added and market value added.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 3

    Build a Model 11/26/2018

    Chapter: 2
    Problem: 21

    a. Using the financial statements shown below, calculate net operating working capital, total net
    operating capital, net operating profit after taxes, free cash flow, and return on invested capital for
    the most recent year. The federal-plus-state tax rate is 25%.

    Lan & Chen Technologies: Income Statements for Year Ending December 31
    (Millions of Dollars) 2020 2019
    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 10,400 8,900
    EBT $88,800 $85,600
    Taxes (25%) 22,200 21,400
    Net income $66,600 $64,200

    Common dividends $43,300 $41,230


    Addition to retained earnings $23,300 $22,970

    Lan & Chen Technologies: December 31 Balance Sheets


    (Millions of Dollars)
    Assets 2020 2019
    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 17,400 9,000
    Total current liabilities $159,150 $144,000
    Long-term debt 90,000 90,000
    Total liabilities $249,150 $234,000
    Common stock $444,600 $444,600
    Retained Earnings 113,300 90,000
    Total common equity $557,900 $534,600
    Total liabilities and equity $807,050 $768,600

    Key Input Data


    Tax rate 25%

    Net operating working capital (NOWC)

    Operating Operating
    2020 NOWC = current assets - current liabilities
    2020 NOWC = -
    2020 NOWC =

    Operating Operating
    2019 NOWC = current assets - current liabilities
    2019 NOWC = -
    2019 NOWC =

    Total net operating capital (TNOC)


    2020 TNOC = NOWC + Fixed assets
    2020 TNOC = +
    2020 TNOC =

    2019 TNOC = NOWC + Fixed assets


    2019 TNOC = +
    2019 TNOC =

    Investment in total net operating capital


    2020 2019
    2020 Inv. In TOC = TNOC - TNOC
    2020 Inv. In TOC = -
    2020 Inv. In TOC =

    Net operating profit after taxes


    2020 NOPAT = EBIT x (1-T)
    2020 NOPAT = x
    2020 NOPAT =

    Free cash flow


    2020 FCF = NOPAT - Investment in total net operating capital
    2020 FCF = -
    2020 FCF =

    Return on invested capital


    2020 ROIC = NOPAT / Total net operating capital
    2020 ROIC = /
    2020 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 10%. Calculate EVA and MVA for
    the most recent year.
    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 10%. 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 10.0%

    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 =

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