Textbook Problem

FINANCIAL STATEMENTS, CASH FLOW, AND TAXES Laiho Industries’s 2014 and 2015 balance sheets (in thousands of dollars) are shown.

	2015	2014
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	42,436
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
Retained earnings	57,605	38,774
Total common equity	$157,605	$128,774
Total liabilities and equity	$311,824	$252,670

1. a. Sales for 2015 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 2015 income statement.
2. b. Construct the statement of stockholders’ equity for the year ending December 31, 2015, and the 2015 statement of cash flows.
3. c. Calculate 2014 and 2015 net operating working capital (NOWC) and 2015 free cash flow (FCF).
4. 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?
5. e. Assume that the firm’s after-tax cost of capital is 10 5%. What is the firm’s 2015 EVA?
6. f. Assume that the firm’s stock price is $22 per share and that at year-end 2015 the firm has 10 million shares outstanding. What is the firm’s MVA at year-end 2015?