Question

Attempts: Keep the Highest: /17 7. The relationship between the book value of shareholders' equity and the firm's Market Aa Aa Value Added (MVA) and Economic Value Added (EVA) Yesterday, Atherton Corp. released its 2015 annual report on the company's website. While reading the report for his boss, Asher came across several terms about which he was unsure. He leaned around the wall of his cubicle and asked his colleague, Tessa, for help. Asher Tessa, do you have a second to help me with my reading of Atherton's annual report? I've come across several unfamiliar terms, and I want to make sure that I'm interpreting the data and management's comments correctly. For example, one of the footnotes to the financial statements uses "the book value of Atherton's shares," and then in another place, it uses "Economic Value Added." I've never encountered those terms before. Do you know what they're talking about? Tessa Yes, I do. Let's see if we can make these terms make sense by talking through their meaning and their significance to investors. The term book value has several uses. It can refer to a single asset or the company as a whole. When referring to an individual asset, such as a piece of equipment, book value refers to the asset's , adjusted for any accumulated depreciation or amortization expense. The value, or difference between the machine's historical cost and its accumulated depreciation expense, is called its book value. In contrast, when the term refers to the entire company, it means the total value of the company's as reported in the firm's

Answer 1

7 Blank 1 - book value refers to the asset's historical cost, adjusted for any accumulated depreciation or amortization expense. Blank 2 - The net value, or difference between the machine's historical cost and its accumulated depreciation expense, is called its book value. Blank 3 - it means the total value of the company's stockholder's equity Blank 4 - as reported in the firm's Balance Sheet Blank 5 - this value important to investors is that it is Historical value Blank 6 - including the repurchase of Treasury stock, Blank 7- and the payment of dividends. Blank 8 - Equally important, it will not change Blank 9 - Atherton's book value does not changes with changes Blank 10 - the firm's book value cannot reflect Blank 11 - and therefore should not be used to evaluate Blank 12 - It is computed by subtracting Atherton's annual dollar cost of capital Blank 13 - from its Net operating profit after taxes. Blank 14 - by multiplying its total investor supplied operating capital, Blank 15 - the greater the after-tax net operating income Blank 16 - the greater the difference between Blank 17 - and the greater the EVA