Question

PROVIDE EQUATIONS OR FORMULAS a. Using the financial statements shown below, calculate net operating working capital, total net operating capital, net operating profit after taxes, free cash flow, and return on invested capital for the most recent year. The federal-plus-state tax rate is 25%.
							Lan & Chen Technologies: Income Statements for Year Ending December 31
(Millions of Dollars)				2020	2019
Sales				$945,000	$900,000
Expenses excluding depreciation and amortization				812,700	774,000
EBITDA				$132,300	$126,000
Depreciation and amortization				33,100	31,500
EBIT				$99,200	$94,500
Interest Expense				10,400	8,900
EBT				$88,800	$85,600
Taxes (25%)				22,200	21,400
Net income				$66,600	$64,200
Common dividends				$43,300	$41,230
Addition to retained earnings				$23,300	$22,970
Lan & Chen Technologies: December 31 Balance Sheets
(Millions of Dollars)
Assets				2020	2019
Cash and cash equivalents				$47,250	$45,000
Short-term investments				3,800	3,600
Accounts Receivable				283,500	270,000
Inventories				141,750	135,000
Total current assets				$476,300	$453,600
Net fixed assets				330,750	315,000
Total assets				$807,050	$768,600
Liabilities and equity
Accounts payable				$94,500	$90,000
Accruals				47,250	45,000
Notes payable				17,400	9,000
Total current liabilities				$159,150	$144,000
Long-term debt				90,000	90,000
Total liabilities				$249,150	$234,000
Common stock				$444,600	$444,600
Retained Earnings				113,300	90,000
Total common equity				$557,900	$534,600
Total liabilities and equity				$807,050	$768,600
Key Input Data
Tax rate				25%
Net operating working capital (NOWC)
2020	NOWC =	Operating current assets	-	Operating current liabilities
2020	NOWC =	??	-	??
2020	NOWC =	??
2019	NOWC =	Operating current assets	-	Operating current liabilities
2019	NOWC =	??	-	??
2019	NOWC =	??
Total net operating capital (TNOC)
2020	TNOC =	NOWC	+	Fixed assets
2020	TNOC =	??	+	??
2020	TNOC =	??
2019	TNOC =	NOWC	+	Fixed assets
2019	TNOC =	??	+	??
2019	TNOC =	??
Investment in total net operating capital
		2020		2019
2020	Inv. In TOC =	TNOC	-	TNOC
2020	Inv. In TOC =	??	-	??
2020	Inv. In TOC =	??
Net operating profit after taxes
2020	NOPAT =	EBIT	x	( 1 - T )
2020	NOPAT =	??	x	??
2020	NOPAT =	??
Free cash flow
2020	FCF =	NOPAT	-	Investment in total net operating capital
2020	FCF =	??	-	??
2020	FCF =	??
Return on invested capital
2020	ROIC =	NOPAT	/	Total net operating capital
2020	ROIC =	??	/	??
2020	ROIC =	??
b. Assume that there were 15 million shares outstanding at the end of the year, the year-end closing stock price was $65 per share, and the after-tax cost of capital was 10%. Calculate EVA and MVA for the most recent year.
							Additional Input Data
Stock price per share		$65.00
# of shares (in thousands)		15,000
After-tax cost of capital		10.0%
Market Value Added
MVA  =	Stock price	x	# of shares	-	Total common equity
MVA  =	??	x	??	-	??
MVA  =		??		-	??
MVA  =	??
Economic Value Added
EVA  =	NOPAT	-	(Operating Capital	x	After-tax cost of capital)
EVA  =	??	-	??	x	??
EVA  =	??	-		??
EVA  =	??

Answer 1