Question

431428470293373958327&eISBN=9781337911009&id=705774549&snapshotid=15798828 mnts, Cash Flow, and Taxes Comprehensive/Spreadsheet Problem 3-19. FINANCIAL STATEMENTS, CASH FLOW, AND TAXES Laiho Industries's 2018 and 2019 balance sheets (in thousands of dollars) are shown. 2019 2018 Cash Accounts receivable Inventories Total current assets Net fixed assets Total assets $102,850 103,365 38,444 $244,659 67,165 $311 824 $ 89,725 85,527 34,982 $210,234 42,436 $252,670 Accounts payable Accruals Notes payable Total current liabilities Long-term debt Total liabilities Common stock Retained earnings Total common equity Total liabilities and equity $ 30,761 30.477 16,717 $ 77,955 76,264 $154,219 100,000 57,605 $157,605 $311 824 $ 23,110 22.656 14.217 $ 59,983 63,914 $123,897 90,000 38,773 $128.773 $252.670

Answer 1

a.
Sales	$455,150
EBITDA as a percentage of sales	15%
Depr. as a % of fixed assets	18%
Tax rate	25%
Interest expense	$8,583
Dividend payout ratio	47%

Laiho Industries Income Statement
(in thousands of dollars)
	2019
Sales	$455,150
Expenses excluding depreciation and amortization	$386,878
EBITDA	$68,273
Depreciation and amortization	$12,090
EBIT	$56,183
Interest expense	$8,583
EBT	$47,600
Taxes (25%)	$11,900
Net Income	$35,700
Common dividends	$16,868
Addition to retained earnings	$18,832

b.
Statement of Stockholders' Equity
(in thousands of dollars)
Balance of Retained Earnings, December 31, 2018	$38,773
Add: Net Income, 2019	$35,700
Less: Common dividends paid, 2019	-16,868
Balance of Retained Earnings, December 31, 2019	$57,605

Statement of Cash Flows
(in thousands of dollars)
Operating Activities
Net Income	$35,700
Depreciation and amortization	12,090
Increase in accounts payable	7,651
Increase in accruals	7,821
Increase in accounts receivable	($17,838)
Increase in inventories	($3,462)
Net cash provided by operating activities	$41,962
Investing Activities
Additions to property, plant, and equipment	($36,819)
Net cash used in investing activities	($36,819)
Financing Activities
Increase in notes payable	$2,500
Increase in long-term debt	12,350
Increase in common stock	10,000
Payment of common dividends	($16,868)
Net cash provided by financing activities	$7,982
Summary
Net increase/decrease in cash	$13,125
Cash balance at the beginning of the year	89,725
Cash balance at the end of the year	$102,850

c.
Net Working Capital
NWC18 =	current assets	-	(A/P and accruals)
NWC18 =	$210,234	-	$45,766
NWC18=	$164,468
NWC19 =	current assets	-	(A/P and accruals)
NWC19 =	$244,659	-	$61,238
NWC19 =	$183,421

Free Cash Flow
FCF19 =	EBIT(1-T)	+	Depreciation	-	[Capital expenditure+Increase in NWC]
FCF19 =	$42,137	+	$12,090	-	36819+18953
FCF19=	($1,545)

d.	An increase in the firm's dividend payout ratio would have no effect on its corporate taxes paid because dividends are paid with after-tax dollars. However, the company's shareholders would pay additional taxes on the additional dividends they would receive.

e.
EVA	= EBIT(1 – Tax) – (Total invested capital x After-tax cost of capital)
Total invested capital	= Notes payable + Long term debt + Common equity
Total invested capital 2019	= $16,717 + $76,264 + $157,605 = $250,586

EVA 2019=	= $42137.1 – ($250,586 x 0.105)
	$ 15,825.57

f.

MVA = (Stock price x shares) – Book value of common equity
MVA 2019 =	= ($22 x 10,000) - $157,605 = $62,395