Answered: e. Assume the firm’s after-tax cost of…

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter12: Fainancial Statement Analysis

Section: Chapter Questions

Problem 16MCQ

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Problem 19: Laiho Industries’s 2017 and 2018 balance sheets (in thousands of dollars are shown).

Please show all work, INCLUDING FORMULAS AND HOW YOU GOT EACH PIECE OF THE FORMULA.

If using EXCEL, please show where you got any numbers from. For example, for letter E.

e. Assume the firm’s after-tax cost of capital is 10.5%. What is the firm’s 2018 EVA?

EVA= EBIT(1-T)-(Total invested capital x After-tax percentage cost of capital)

How did you find the total invested capital.

I posted this questions numerous times, and it seems that for the last couple questions people are using informatiojn from 2017 and not 2018. Please USE CORRECT INFORMATION. Please also explain why you are using the calculations that you have used.

a. Sales for 2018 were $455,150,000, and EBITDA was 15% of sales. Furthermore, depreciation and amortization were 11% of net fixed assets, interest was $8,575,000, the corporate tax rate was 40%, and Laiho pays 40% of its net income as dividends. Given this information, construct the firm’s 2018 income statement.

b. Construct the statement of stockholders’ equity for the year ending December 31, 2018, and the 2018 statement of cash flows.

c. Calculate 2017 and 2018 net operating working capital (NWOC) and 2018 free cash flow (FCF). Assume the firm has no excess cash.

d. If Laiho increased its dividend payout ratio, what effect would this have on corporate taxes paid? What effect would this have on taxes paid by the company’s shareholders?

(Answer part D in full, complete sentences)

e. Assume the firm’s after-tax cost of capital is 10.5%. What is the firm’s 2018 EVA?

f. Assume that the firm’s stock price is $22 per share and that at year-end 2018 the firm has 10 million shares outstanding. What is the firm’s MVA at year-end 2018?

Cash
Accounts receivable
Inventories
Total current assets
Net fixed assets
Total assets
Accounts payable
Accruals
Notes payable
Total current liabilities
Long-term debt
Total liabilities
Common stock
Retained earnings
Total common equity
Total liabilities and equity
2018
$102,850
103,365
38,444
$244,659
67,165
$311,824
$ 30,761
30,477
16,717
$ 77,955
76,264
$154,219
100,000
57,605
$157,605
$311,824
2017
$ 89,725
85,527
34,982
$210,234
42,436
$252,670
$ 23,109
22,656
14,217
$ 59,982
63,914
$123,896
90,000
38,774
$128,774
$252,670

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