The 2018 and 2019 year-end balance sheets of Kairos Industries are shown below: 20192018Cash$102,950$89,825Accounts receivable103,46585,627Inventories38, 54435,082Total current assets244, 959210, 534Property, plant and equipment67,26542,536 Total assets312,224253,070Accounts payable30,86123,209Accruals30,57722,756Liabilities payable16,81714,317 Total current liabilities78,25560,282Long-term liabilities76,36464,014 Total liabilities154, 619124,296Common stock100,00090,100Retained earnings57,60538,874 Total stockholders' equity157,605128,974 Total liabilities plus stockholders' equity$312,224$253,270 Explain the effect it would have on taxes paid by shareholders and the company if Kairos Industries were to increase its dividend rate.Calculate the economic value added (EVA) and market value added (MVA) in 2019, considering that the after-tax cost of capital is 12% and the stock price of Kairos Industries is $20 with 9 million shares outstanding.

Step 1 1 The greater the dividend income received by shareholders, the higher the tax burden on the…

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10th Edition

ISBN:9781337902571

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter3: Financial Statements, Cash Flow, And Taxes

Section: Chapter Questions

Problem 19SP

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The 2018 and 2019 year-end balance sheets of Kairos Industries are shown below:

	*2019*	*2018*
Cash	$102,950	$89,825
Accounts receivable	103,465	85,627
Inventories	38, 544	35,082
Total current assets	244, 959	210, 534
Property, plant and equipment	67,265	42,536
Total assets	312,224	253,070
Accounts payable	30,861	23,209
Accruals	30,577	22,756
Liabilities payable	16,817	14,317
Total current liabilities	78,255	60,282
Long-term liabilities	76,364	64,014
Total liabilities	154, 619	124,296
Common stock	100,000	90,100
Retained earnings	57,605	38,874
Total stockholders' equity	157,605	128,974
Total liabilities plus stockholders' equity	$312,224	$253,270

Explain the effect it would have on taxes paid by shareholders and the company if Kairos Industries were to increase its dividend rate.
Calculate the economic value added (EVA) and market value added (MVA) in 2019, considering that the after-tax cost of capital is 12% and the stock price of Kairos Industries is $20 with 9 million shares outstanding.

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