Free Cash Flow Use the financial statements shown here for Lan & Chen Technologies. The federal-plus-state tax rate is 25%. Lan & Chen Technologies: Income Statements for Year Ending December 31 (Thousands of Dollars) 2023 2022 Sales $960,000 $900,000 Expenses excluding depreciation and amortization 820,000 774,000 EBITDA $140,000 $126,000 Depreciation and amortization 33,000 31,500 EBIT $107,000 $94,500 Interest Expense 10,000 8,900 EBT $97,000 $85,600 Taxes (25%) 24,250 21,400 Net income $72,750 $64,200 Common dividends $43,000 $41,230 Addition to retained earnings $29,750 $22,970 Lan & Chen Technologies: December 31 Balance Sheets (Thousands of Dollars) Assets 2023 2022 Cash and cash equivalents $48,250 $45,000 Short-term investments 3,200 3,600 Accounts Receivable 280,500 270,000 Inventories 141,000 135,000 Total current assets $472,950 $453,600 Net fixed assets 360,750 315,000 Total assets $833,700 $768,600 Liabilities and equity Accounts payable $95,000 $90,000 Accruals 48,000 45,000 Notes payable 27,400 9,000 Total current liabilities $170,400 $144,000 Long-term debt 98,950 90,000 Total liabilities $269,350 $234,000 Common stock $444,600 $444,600 Retained Earnings 119,750 90,000 Total common equity $564,350 $534,600 Total liabilities and equity $833,700 $768,600 Question b. Assume there were 15 million shares outstanding at the end of 2023, the year-end closing stock price was $65 per share, and the after-tax cost of capital was 10%. Calculate EVA and MVA for 2023, calculate EVA and MVA for 2023. EVA: MVA:

Entrepreneurial Finance

6th Edition

ISBN:9781337635653

Author:Leach

Publisher:Leach

Chapter14: Security Structures And Determining Enterprise Values

Section: Chapter Questions

Problem 8EP

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Question

Free Cash Flow

Use the financial statements shown here for Lan & Chen Technologies. The federal-plus-state tax rate is 25%.

Lan & Chen Technologies: Income Statements for Year Ending December 31
(Thousands of Dollars)	2023	2022
Sales	$960,000	$900,000
Expenses excluding depreciation and amortization	820,000	774,000
EBITDA	$140,000	$126,000
Depreciation and amortization	33,000	31,500
EBIT	$107,000	$94,500
Interest Expense	10,000	8,900
EBT	$97,000	$85,600
Taxes (25%)	24,250	21,400
Net income	$72,750	$64,200

Common dividends	$43,000	$41,230
Addition to retained earnings	$29,750	$22,970

Lan & Chen Technologies: December 31 Balance Sheets
(Thousands of Dollars)
Assets	2023	2022
Cash and cash equivalents	$48,250	$45,000
Short-term investments	3,200	3,600
Accounts Receivable	280,500	270,000
Inventories	141,000	135,000
Total current assets	$472,950	$453,600
Net fixed assets	360,750	315,000
Total assets	$833,700	$768,600
Liabilities and equity
Accounts payable	$95,000	$90,000
Accruals	48,000	45,000
Notes payable	27,400	9,000
Total current liabilities	$170,400	$144,000
Long-term debt	98,950	90,000
Total liabilities	$269,350	$234,000
Common stock	$444,600	$444,600
Retained Earnings	119,750	90,000
Total common equity	$564,350	$534,600
Total liabilities and equity	$833,700	$768,600

Question

b. Assume there were 15 million shares outstanding at the end of 2023, the year-end closing stock price was $65 per share, and the after-tax cost of capital was 10%. Calculate EVA and MVA for 2023, calculate EVA and MVA for 2023.

EVA:

MVA:

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