Question: a. Using the financial statements shown here for Lan & Chen Technologies, calculate net operating working capital, total net operating capital, net operating profit after
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
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