Homework Answers
Change = (Year 2 Value - Year 1 Value)/Year 1 Value. Other Formulas are mentioned in the column Formula
| Year 2 | Year 1 | Change | Formula | |
| Sales | 3,150,000 | 3,000,000 | 5.00% | In the Income Statement |
| Net Income | 255,150 | 216,000 | 18.13% | In the Income Statement |
| Net Cash Flow | 365,400 | 321,000 | 13.83% | Net Income + Depreciation & Amortization |
| Net Operating Working Capital | 1,446,375 | 1,033,125 | 40.00% | Current Assets - Accounts Payable - Accruals |
| Earnings per share | 0.91 | 1.08 | -15.74% | Net Income/Shares Outstanding |
| Dividents per share | 0.55 | 0.65 | -15.38% | Common dividends/Shares Outstanding |
| Book Value per share | 5.00 | 5.00 | 0.00% | Total Equity/Shares Outstanding |
| Cash flow pre share | 1.31 | 1.61 | -18.63% | Net Cash Flow/Shares Outstanding |
| Market Price per share | 21.23 | 19.75 | 7.49% | Given |
| MVA Calculation | ||||
| Market Value of Equity | 5,929,539 | 3,940,125 | 50.49% | Market Price per share * Shares Outstanding |
| Book Value of Equity | 1,396,500 | 997,500 | 40.00% | In the balance sheet |
| Market Value Added | 4,533,039 | 2,942,625 | 54.05% | Market Value of Equity - Book Value of Equity |
| EVA Calculation | ||||
| NOPAT | 311,850 | 261,000 | 19.48% | EBIT*(1-Tax Rate) |
| Investor-supplied operating Capital | 3,002,475 | 2,144,625 | 40.00% | Total Equities + Total Liabilities - Accounts Payable - Accruals |
| Weighted Average cost of capital | 7.98% | 7.30% | Given | |
| Dollar Cost of Capital | 239,490 | 156,488 | 53.04% | Weighted Average Cost of Capital*Investor-Supplied Operating Capital |
| Return on Invested Capital | 10.39% | 12.17% | -14.63% | NOPAT/Investor-Supplied operating Capital |
| EVA | 72,360 | 104,512 | -30.76% | NOPAT - Dollar Cost of Capital |
1) EVA as the decision criterion, firm's EVA has reduced from the previous year. Hence, it is recommended to sell the stock
2) Statement 1 is correct as growth of sales = 5% and growth of Net Income = 18.13%
Statement 2 is wrong. NCF is calculated as Net Income + Annual Depreciation & Amortization (not EBITDA + Annual Depreciation & Amortization)
Statement 3 is wrong. Number of shares is irrelevant to the determination of market value of equity
Statement 4 is wrong. EVA is increased if ROIC increases or WACC decreases not when ROIC > WACC. If ROIC > WACC, EVA would be positive
Statement 5 is correct. EVA = NOPAT - WACC*invested operating capital.
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Attempts: Keep the...
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The answer to the question above is posted below! I just need an explanation of how...
The answer to the question above is posted below! I just
need an explanation of how NOPAT and net assets were adjusted
below.
Pisces plc produced the following statement of financial position and income statement at the end of the third year of trading: Statement of financial position (balance sheet) as at the end of the third year €m ASSETS Non-current assets 40 Property Machinery and equipment Motor vans 80 Marketable investments Current assets Inventories Trade receivables Cash Total assets...
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Aa 11. The calculation of a firm's Market Value Added (MVA) and Economic Value Added Aa (EVA) Josh, your newly appointed boss, has tasked you with evaluating the following financial data for Western Gas & Electric Co. to determine how Western G&E'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 Western G&E's value has increased over the past year, a neutral (or...
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Assignment 03 - Financial Statements, Cash Flow, and Taxes Asha Yes, I do. Let's see if we can make these terms make sense by talking through their meaning and their significance to investors. The term book value has several uses. It can refer to a single asset or the company as a whole. When referring to an individual asset, such as a piece of equipment, book value refers to the asset's , adjusted for any accumulated depreciation or amortization expense....
The answer to the question above is posted below! I just
need an explanation of how NOPAT and net assets were adjusted
below.
Pisces plc produced the following statement of financial position and income statement at the end of the third year of trading: Statement of financial position (balance sheet) as at the end of the third year €m ASSETS Non-current assets 40 Property Machinery and equipment Motor vans 80 Marketable investments Current assets Inventories Trade receivables Cash Total assets...
Find FCF, MVA, and EVA. PLEASE SHOW ALL YOUR WORK
PLEASE, THANKS.
Balance Sheet Income Statement Net Sales Operating Cost 6,000,000 Depreciation 1,000,000 EBIT Interest EBT Taxes 40% Net Income 12,000,000 Accounts Payable 3,000,000 1,000,000 2,000,000 6,000,000 5,600,000 17,400,000 29,000,000 Current Assets 14,000,000 Accruals Notes Payable Current Liabilities Long-term Debt Common Equity Total Liabilities and Equity 5,000,000 1,000,000 4,000,000 1,600,000 2,400,000 Net Fixed Assets 15,000,000 Total Assets 29,000,000 Shares Stock Price After Tax Cost of Capital Prior year net fixed...
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