Question
In: Finance
Last year Miami Rivet had $5 million in operating income (EBIT). Its depreciation expense was $1...
Last year Miami Rivet had $5 million in operating income (EBIT). Its depreciation expense was $1 million, its interest expense was $1 million, and its corporate tax rate was 25%. At year-end, it had $14 million in operating current assets, $3 million in accounts payable, $1 million in accruals, $2 million in notes payable, and $15 million in net plant and equipment. Assume Miami Rivet has no excess cash. Miami Rivet uses only debt and common equity to fund its operations. (In other words, Miami Rivet has no preferred stock on its balance sheet.) Miami Rivet had no other current liabilities. Assume that Miami Rivet only noncash item was depreciation. Miami Rivet has 500,000 common shares outstanding, and the common stock amount on the balance sheet is $5 million. The company has not issued or repurchased common stock during the year. Last year’s balance in retained earnings was $11.2 million, and the firm paid out dividends of $1.8 million during the year. If the firm’s stock price at year-end is $52, what is the firm’s market value added (MVA)? If the firm’s after-tax percentage cost of capital is 9%, what is the firm’s Long-term debt at year-end? If the firm’s after-tax percentage cost of capital is 9%, what is the firm’s EVA at year-end?
I only need question about EVA Answered please!!! THank you!!!
Solutions
Expert Solution
| Particulars | Amount In Millions | |||||||||
| EBIT | = | 5 | (Given) | |||||||
| Tax Rate | = | 25% | (Given) | |||||||
| Net Operating profit after tax | = | Earning before interest and taxes (1-Tax) | ||||||||
| = | 5(1-0.25) | |||||||||
| = | 3.75 | |||||||||
| Cost of Capital | = | 9% | (Given) | |||||||
| Calculation of Capital Employed | ||||||||||
| Balance sheet | ||||||||||
| Current Assets | 14 | |||||||||
| Plant and equipment | 15 | |||||||||
| Total Assets | 29 | |||||||||
| Accruals | 1 | |||||||||
| Accounts payable | 3 | |||||||||
| Notes payable | 2 | |||||||||
| Share capital | 5 | |||||||||
| Retained earning (after dividend) | 9.4 | |||||||||
| (11.2-1.8) | 20.4 | |||||||||
| Long term debt | ||||||||||
| Balance figure | 8.6 | |||||||||
| Total Capital and Liabilities | 29 | |||||||||
| Total capital employed | = | Share capital +Long Terms loans+debenture+Reserves- debit balance of P&L- Fictious assets | ||||||||
| = | 5+9.4+8.6 | |||||||||
| 23 | ||||||||||
| Economic value added | = | Net Operating profit after tax -Cost of Capital (X) Average Capital Employed | ||||||||
| = | 3.75-(23*0.09) | |||||||||
| Economic value added | = | 1.68 | ||||||||
| Assumptions:- | ||||||||||
| Accruals given in questions are on liabilities. | ||||||||||
jeff jeffy answered 3 months agoRelated Solutions
Last year Miami Rivet had $5 million in operating income (EBIT). Its depreciation expense was $1...
Last year Miami Rivet had $5 million in operating income (EBIT).
Its depreciation expense was $1 million, its interest expense was
$1 million, and its corporate tax rate was 25%. At year-end, it had
$14 million in operating current assets, $3 million in accounts
payable, $1 million in accruals, $2 million in notes payable, and
$15 million in net plant and equipment. Assume Miami Rivet has no
excess cash. Miami Rivet uses only debt and common equity to fund
its...
Last year Miami Rivet had $5 million in operating income (EBIT). Its depreciation expense was $1...
Last year Miami Rivet had $5 million in operating income (EBIT).
Its depreciation expense was $1 million, its interest expense was
$1 million, and its corporate tax rate was 25%. At year-end, it had
$14 million in operating current assets, $3 million in accounts
payable, $1 million in accruals, $2 million in notes payable, and
$15 million in net plant and equipment. Assume Miami Rivet has no
excess cash. Miami Rivet uses only debt and common equity to fund
its...
1) Last year Miami Rivet had $5 million in operating income (EBIT). Its depreciation expense was...
1) Last year Miami Rivet had $5 million in operating income
(EBIT). Its depreciation expense was $1 million, its interest
expense was $1 million, and its corporate tax rate was 25%. At
year-end, it had $14 million in operating current assets, $3
million in accounts payable, $1 million in accruals, $2 million in
notes payable, and $15 million in net plant and equipment. Assume
Miami Rivet has no excess cash. Miami Rivet uses only debt and
common equity to fund...
Information given: Last year Miami Rivet had $5 million in operating income (EBIT). Its depreciation expense...
Information given:
Last year Miami Rivet had $5 million in operating income (EBIT).
Its depreciation expense was $1 million, its interest expense was
$1 million, and its corporate tax rate was 25%. At year-end, it had
$14 million in operating current assets, $3 million in accounts
payable, $1 million in accruals, $2 million in notes payable, and
$15 million in net plant and equipment. Assume Miami Rivet has no
excess cash. Miami Rivet uses only debt and common equity to...
Last year Charlie Brown had $5 million in operating income (EBIT). It’s depreciation expense was $1...
Last year Charlie Brown had $5 million in operating income
(EBIT). It’s depreciation expense was $1 million, its interest
expense was $1 million, and its corporate tax rate was 40%. At
year-end, it had $14 million in current assets, $3 million in
accounts payable, $1 million in accruals, $2 million in notes
payable, and $15 million in net plant and equipment. Charlie had no
other current liabilities. Assume the Charlie’s only noncash item
was depreciation.
What was the company’s net...
Last year Charlie Brown had $5 million in operating income (EBIT). It’s depreciation expense was $1...
Last year Charlie Brown had $5 million in operating income
(EBIT). It’s depreciation expense was $1 million, its interest
expense was $1 million, and its corporate tax rate was 40%. At
year-end, it had $14 million in current assets, $3 million in
accounts payable, $1 million in accruals, $2 million in notes
payable, and $15 million in net plant and equipment. Charlie had no
other current liabilities. Assume the Charlie’s only noncash item
was depreciation.
What was the company’s net...
Gemco Jewelers earned $5 million in after tax operating income last year (EBIT*(1-T)). The firm had...
Gemco Jewelers earned $5 million in after tax operating income
last year (EBIT*(1-T)). The firm had capital expenditures of $4
million and depreciation of $2 million during the year, and no NWC.
Gemco has a pretax cost of debt of 3%, and a tax rate of 20%. The
company has an unlevered beta of 1. The risk-free interest rate is
1.5% and the market risk premium is 4%.
1.Find Gemco’s Free Cash Flow (FCF)
2.Assume the FCF found is perpetual....
The Moore Corporation had operating income (EBIT) of $800,000. The company's depreciation expense is $240,000. Moore...
The Moore Corporation had operating income (EBIT) of $800,000.
The company's depreciation expense is $240,000. Moore is 100%
equity financed, and it faces a 35% tax rate.
What is the company's net income?
$
Assuming no changes to any of the Balance Sheet accounts, what
is its net cash flow?
$
Lauryn’s Doll Co. had EBIT last year of $49 million, which is net of a depreciation...
Lauryn’s Doll Co. had EBIT last year of $49 million, which is
net of a depreciation expense of $4.9 million. In addition,
Lauryn’s made $4.5 million in capital expenditures and increased
net working capital by $2.2 million. Assume that Lauryn’s has a
reported equity beta of 1.7, a debt-to-equity ratio of .7, and a
tax rate of 21 percent. What is Lauryn’s FCF for the
year?(Do not round intermediate calculations. Enter your
answer in millions rounded to 2 decimal places.)
Lauryn’s Doll Co. had EBIT last year of $44 million, which is net of a depreciation...
Lauryn’s Doll Co. had EBIT last year of $44 million, which is
net of a depreciation expense of $4.4 million. In addition,
Lauryn’s made $5.25 million in capital expenditures and increased
net working capital by $3.3 million. Assume that Lauryn’s has a
reported equity beta of 1.4, a debt-to-equity ratio of .7, and a
tax rate of 21 percent. What is Lauryn’s FCF for the
year?(Do not round intermediate calculations. Enter your
answer in millions rounded to 2 decimal places.)...
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- MARGI sells different types of wine. Customers place orders to the most popular “Summer Wine” at...
- A firm's bonds have a maturity of 8 years with a $1,000 face value, have an...
- Naive reasoning suggests that a string theory vacuum with cosmological constant Lambda1 is always unstable as...
- I. Design and code a class Rectangle that has the following properties: Two private members double...
- A bond has a $1,000 par value, 10 years to maturity, and an 8% annual coupon...
- The following are the monthly rates of return for Madison Cookies and for Sophie Electric during...
- 1.) Think back to August 6, 1945. The United States has just dropped an atomic weapon...
ADVERTISEMENT