a. Using the financial statements shown here for Lan & Chen Technologies, calculate net operating working capital, total net operating capital, net operating profit after taxes, free cash flow, and return on invested capital for 2016.

b. Assume there were 15 million shares outstanding at the end of 2016, the year-end closing stock price was $65 per share, and the after-tax cost of capital was 8%. Calculate EVA and MVA for 2016.

Lan & Chen Technologies: Income Statements for Year Ending December 31

2016 2015

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..................................................10,470......................8,600

Pre-tax earnings................................................$ 88,730..................$ 85,900

Taxes (40%)......................................................35,492.....................34,360

Net income......................................................$ 53,238..................$ 51,540

Common dividends............................................$ 43,300..................$ 41,230

Addition to retained earnings..................................$ 9,938.................$ 10,310

Lan & Chen Technologies: December 31 Balance Sheets

2016 2015

Assets

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.......................................26,262........................9,000

Total current liabilities...........................$168,012...................$144,000

Long-term debt.....................................94,500......................90,000

Total liabilities....................................$262,512..................$234,000

Common stock.....................................444,600....................444,600

Retained earnings....................................99,938.....................90,000

Total common equity.............................$544,538..................$534,600

Total liabilities and equity.......................$807,050..................$768,600