Lan & Chen Technologies

Begin with the partial model in the file Ch02 P15 Build a Model.xls on the textbook’s Web site.

a. Using the financial statements shown below 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 2010. (Hint: Start with the partial model in the file and report all dollar figures in thousands to reduce

clutter.)

b. Assume there were 15 million shares outstanding at the end of 2010, the year-end closing stock price was $65 per share, and the after-tax cost of capital was 8%. Calculate EVA and MVA for 2010. Lan & Chen Technologies: Income Statements for Year Ending December 31 (Thousands of Dollars)

2010 2009

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

EBT $ 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

2010 2009

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