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FINANCIAL STATEMENTS, CASH FLOW, AND TAXES Laiho Industries’s 2015 and 2016 balance sheets (in thousands of dollars) are shown. 2016 2015 Cash $102,850 $ 89,725 Accounts receivable 103,365 85,527 Inventories 38,444 34,982 Total current assets $244,659 $210,234 Net fixed assets 67,165 42,430 Total assets $311,824 $252,670 Accounts payable $ 30,761 $ 23,109 Accruals 30,477 22,656 Notes payable 16,717 14,217 Total current liabilities $ 77,955 $ 59,982 Long-term debt 76,264 63,914 Total liabilities $154,219 $123,896 Common stock 100,000 90,000 Retainec earnings 57,605 38,774 Total common equity $157,605 $128,774 Total liabilities and equity $311,824 $252,670 a. Sales for 2016 were $455,150,000, and EBITDA was 15% of sales. Furthermore, depredation 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 2016 income statement. b. Construct the statement of stockholders’ equity for the year ending December 31, 2016, and the 2016 statement of cash flows. c. Calculate 2015 and 2016 net operating working capital (NOWC) and 2016 free cash flow (FCF). d. If Laiho increased its dividend payout ratio, what effect would this have on corporate taxes paid? What effort would this have on taxes paid by the company’s shareholders? e. Assume that the firm’s after-tax cost of capital is 10.5%. What is the firm’s 2016 EVA? f. Assume that the firm’s stock price is $22 per share and that at year-end 2016 the firm has 10 million shares outstanding. What is the firm’s MVA at year-end 2016?

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Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781305635937
BuyFind

Fundamentals of Financial Manageme...

9th Edition
Eugene F. Brigham + 1 other
Publisher: Cengage Learning
ISBN: 9781305635937

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Chapter
Section
Chapter 3, Problem 19SP
Textbook Problem

FINANCIAL STATEMENTS, CASH FLOW, AND TAXES Laiho Industries’s 2015 and 2016 balance sheets (in thousands of dollars) are shown.

  2016 2015
Cash $102,850 $ 89,725
Accounts receivable 103,365 85,527
Inventories 38,444 34,982
Total current assets $244,659 $210,234
Net fixed assets 67,165 42,430
Total assets $311,824 $252,670
Accounts payable $ 30,761 $ 23,109
Accruals 30,477 22,656
Notes payable 16,717 14,217
Total current liabilities $ 77,955 $ 59,982
Long-term debt 76,264 63,914
Total liabilities $154,219 $123,896
Common stock 100,000 90,000
Retainec earnings 57,605 38,774
Total common equity $157,605 $128,774
Total liabilities and equity $311,824 $252,670
  1. a. Sales for 2016 were $455,150,000, and EBITDA was 15% of sales. Furthermore, depredation 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 2016 income statement.
  2. b. Construct the statement of stockholders’ equity for the year ending December 31, 2016, and the 2016 statement of cash flows.
  3. c. Calculate 2015 and 2016 net operating working capital (NOWC) and 2016 free cash flow (FCF).
  4. d. If Laiho increased its dividend payout ratio, what effect would this have on corporate taxes paid? What effort would this have on taxes paid by the company’s shareholders?
  5. e. Assume that the firm’s after-tax cost of capital is 10.5%. What is the firm’s 2016 EVA?
  6. f. Assume that the firm’s stock price is $22 per share and that at year-end 2016 the firm has 10 million shares outstanding. What is the firm’s MVA at year-end 2016?

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