Question

11. The calculation of a firm's Market Value Added (MVA) and EconomicValue Added (EVA) Taj, your newly appointed boss, has tasked you with evaluating the following financial data for Galaxy Corp. to determine how Galaxy's value has changed over the past year. The investment firm for which you work will make a positive (or "buy recommendation to its investing clients if Galaxy's value has increased over the past year, a neutral (or "hold) recommendation if the value has remained constant, or a negative (or "sell") recommendation if the value has decreased. He has recommended that you use several metrics to ascertain how the firm's value has changed, and he has provided you with the following income statement and balance sheet. Galaxy Corp. Income Statement January 1 - December 31, Year 2 Year 2 Sales Expenses EBITDA Depreciation and amortization expense EBIT Interest expense $7,350,000 5,880,000 $1,470,000 257,250 $1,212,750 220,500 $992,250 396,900 $595,350 Year 1 $7,000,000 5,740,000 $1,260,000 245,000 $1,015,000 175,000 $840,000 336,000 $504,000 $302,400 $ 201,600 ЕВТ Tax expense (40%) Net Income Common dividends Addition to retained earnings Excludes depreciation and amortization $357,210 $238,140

Answer 1