Lan & Chen Technologies: Income Statements for Year Ending December 31 (Thousands of Dollars) 2013 2012

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.

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

 (Thousands of Dollars)

2013

2012

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

Lan & Chen Technologies: December 31 Balance Sheets

(Thousands of Dollars)

Assets

2013

2012

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

Key Input Data

Tax rate

40%

Net operating working capital

2013

NOWC =

Operating current assets

-

Operating current liabilities

2013

NOWC =

-

2013

NOWC =

2012

NOWC =

Operating current assets

-

Operating current liabilities

2012

NOWC =

-

2012

NOWC =

Total net operating capital

2013

TOC =

NOWC

+

Fixed assets

2013

TOC =

+

2013

TOC =

2012

TOC =

NOWC

+

Fixed assets

2012

TOC =

+

2012

TOC =

Investment in total net operating capital

2013

2012

2013

Inv. In TOC =

TOC

-

TOC

2013

Inv. In TOC =

-

2013

Inv. In TOC =

Net operating profit after taxes

2013

NOPAT =

EBIT

x

( 1 - T )

2013

NOPAT =

x

2013

NOPAT =

Free cash flow

2013

FCF =

NOPAT

-

Net investment in operating capital

2013

FCF =

-

2013

FCF =

Return on invested capital

2013

ROIC =

NOPAT

/

Total net operating capital

2013

ROIC =

/

2013

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 8%. 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

8.0%

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  =