Quantitative Problem: Rosnan Industries\' 2017 and 2016 balance sheets and incom
ID: 2792368 • Letter: Q
Question
Quantitative Problem: Rosnan Industries' 2017 and 2016 balance sheets and income statements are shown below. All of the balance of Cash and Equivalents is an operating asset.
Using the financial statements above, what is Rosnan's 2017 market value added (MVA)? Round your answer to the nearest dollar. Do not round intermediate calculations.
$
Using the financial statements given earlier, what is Rosnan's 2017 economic value added (EVA)? Round your answer to the nearest cent. Do not round intermediate calculations.
$
Quantitative Problem: Rosnan Industries' 2017 and 2016 balance sheets and income statements are shown below. All of the balance of Cash and Equivalents is an operating asset.
Balance Sheets: 2017 2016 Cash and equivalents $100 $85 Accounts receivable 275 200 Inventories 375 250 Total current assets $750 $635 Net plant and equipment 2,000 1,490 Total assets $2,750 $2,125 Accounts payable $150 $85 Accruals 75 50 Notes payable 150 75 Total current liabilities $375 $210 Long-term debt 450 290 Common stock 1,225 1,225 Retained earnings 700 400 Total liabilities and equity $2,750 $2,125 Income Statements: 2017 2016 Sales $2,000 $1,500 Operating costs excluding depreciation 1,250 1,000 EBITDA $750 $500 Depreciation and amortization 100 75 EBIT $650 $425 Interest 62 45 EBT $588 $380 Taxes (40%) 235 152 Net income $353 $228 Dividends paid $53 $48 Addition to retained earnings $300 $180 Shares outstanding 190 190 Price $31.25 $28.75 WACC 8.00%Using the financial statements above, what is Rosnan's 2017 market value added (MVA)? Round your answer to the nearest dollar. Do not round intermediate calculations.
$
Using the financial statements given earlier, what is Rosnan's 2017 economic value added (EVA)? Round your answer to the nearest cent. Do not round intermediate calculations.
$
Explanation / Answer
Market value added = (Shares outstanding) ( stock price) - Total common equity
We know that
Assets = liabilities + owners equity
Equity = Total Assets - Total liabilities
Equity = $ 2750 - $ 2050
MVA = ( 190) ( $ 31.25) - $ 700
MVA = $ 5238
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Economic value added = EBIT ( 1 - tax rate) - ( Total net operating capital) (WACC)
Total net operating capital = Net operating working capital + Operating long term assets
Net operating working capital = Operating current assets - operating current liabilities
Net operating working capital = $ 750 - $ 375 ( $ 375)
Total net operating capital = $375 + $ 2000
Total net operating capital = $ 2375
EVA = $ 650 ( 1 - 0.40) - $ 2375 x 0.08
EVA = $200