Question

Ice Ice Corporation Balance Sheet (in millions) 2020 2019 2020 2019 861 549 Current Assets Cash Accounts Receivable Inventory Total Current Liabilities Accounts Payable Notes Payable Total 830 458 402 688 1,548 493 991 2,345 520 701 1,221 1,379 Long-Term Debt Total Liabilities 6,140 7,519 5,822 7,312 Fixed Assets PP&E Accumulated Depreciation Net PP&E 11,202 1,238 9,964 9,340 930 8,410 1,222 21 Common Stock Preferred Stock Retained Earnings Liabilties and Equity 1,398 49 3,343 12,309 1,403 9,958 Total Assets 12,309 9,958 Ice Ice Corporation Income Statement (in millions) 2020 Sales Cost of Sales Gross Profit Operating Expense EBITDA Depreciation/Amortization Earnings Before Interest and Taxes Interest Expense Earnings Before Taxes Taxes Net Income 15,708 9,425 6,283 2,836 3,447 308 3,139 349 2,790 586 2,204 What is FCFF of Ice Ice Corp in 2020? $-256M $ 668M • $ 360M $ 1,638M $ 329M

If the WACC of Ice Ice Corp is 12.4%, what is the EVA for Ice Ice Corp in 2020?

$746M $1,095M $1,027M $1,416M

Answer 1

Calculation of Change in working capital
Change in Working Capital	2019	2020
Accounts Receivable		402	493
Inventory			688	991
Total current asset		1090	1484
Accounts payable		520	549
Notes payable		701	830
Total current liability		1221	1379
Net working capital		-131	105
Increase in WC		236
Capital Expenditure = (PP&E 2020 - PP&E2019) = (11,202 - 9,340) = 1,862
NOPAT = EBIT * (1-tax rate)
tax rate = Tax / profit before tax = 586 / 2,790
NOPAT = [3,139 * (1-586 / 2,790)] = 2,479.70
FCFF = (NOPAT + depreciation - increase in working capital - capital expenditure)
FCFF = (2,490.70 + 308 - 236 - 1,862) = $700.7
EVA = [NOPAT - WACC * (Total asset - current liability)]
EVA = [2,479.70 - 12.4% * (12,309 - 1,379)] = $1,124.38