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SEATWORK # 1 Answer

MABALANCE CO.
Balance Sheet
Year 2014 & 2013

Cash
Accounts Receivable
Inventories
Prepaid Expenses
Total Current
Assets
Fixed Assets, at
cost
Accumulated
Depreciation
Net Fixed Assets
Total Assets

Accounts Payable
Notes Payable
Accruals
Interest Payable
Dividends Payable
Total Current
Liabilities
Long Term debt
Common Stock
Retained Earnings
Total Equity
Total Liabilities
and Equity

2014
4,076,59
0
7,456,80
7
1,328,06
0
278,500
13,139,9
57
12,354,0
00
6,078,65
0
6,275,35
0
19,415,3
07

2013
4,265,08
7
6,358,01
3
1,290,76
1
240,700
12,154,5
61
11,850,0
00
5,654,30
0
6,195,70
0
18,350,2
61

4,287,95
0
500,000
143,009
75,400
305,816
5,312,17
5
6,000,00
0
7,000,00
0
1,103,13
2
8,103,13
2
19,415,3
07

4,124,56
9
600,000
168,003
48,600
495,100
5,436,27
2
5,000,00
0
7,500,00
0
413,989
7,913,98
9
18,350,2
61

MABALANCE CO.
Income Statement
Year 2014 & 2013

Sales
COGS
Gross Profit
Other Expenses
EBITDA
Dep. & Amort.
EBIT
Interest

2014
10,785,30
0
5,330,988
5,454,312
2,086,521
3,367,791
424,350
2,943,441
203,456

2013
9,749,870
4,765,440
4,984,430
2,100,488
2,883,942
592,500
2,291,442
180,345

Expense
EBT
Taxes
Net Income

2,739,985
1,095,994
1,643,991

2,111,097
844,439
1,266,658

MABALANCE CO.
Cash Flow Statement
Year 2014
NI
Dep.
Interest Ex
Inc. in AR
Inc. in Inv.
Inc. in Pre
Inc. in AP
Dec. in Accrual
Operating CF

1,643,991
424,350
203,456
(1,098,794)
(37,299)
(37,800)
163,381
(24,994)
1,236,291

Cash flow from investing


Purchase of FA

(504,000)

Financing
Interest Paid
(176,656)
Dividends Paid
(1,144,132)
Payment of NP
(100,000)
Issuance of LTD
1,000,000
Purchase of Treasury
(500,000)
Financing
(920,788)
Net Increase
(188,497)
Cash, beg.
4,265,087
Cash, end
4,076,590
Supporting Schedules/Computation:
Int.
Pay, be
Int. Ex
Interest
end
Interest
Paid

48,600

RE, beg.
NI

Declared

413,989
1,643,99
1
1,103,13
2
954,848

Div. Pay
Declared
Div, End
Div.
Paid

495,100
954,848
305,816
1,144,13
2

RE, end

203,456
75,400
176,656

SEATWORK #2 ANSWER

1. MVA = (Shares outstanding)(Stock Price) - Total common equity.


P162,000,000 = (6,000,000)P0 - P300,000,000
P462,000,000 = (6,000,000)P0
P0 = P77.00.
2. MVA = (Shares outstanding)(Stock Price) - Total common equity.
MVA = (2,000,000)(P15) - P40,000,000
MVA = -P10,000,000.
3. NOPAT02
= EBIT(1 - T)
= P450,000,000(0.6)
= P270,000,000.
4.
Net operating
working capital02

= P1,116,000,000 - P540,000,000 = P576,000,000.

5.
Total investor - supplied
operating capital02
= P900,000,000 + P576,000,000 = P1,476,000,000.
6.
NOWC01 = Current assets - Non-interest charging current liabilities
= P1,080,000,000 - P450,000,000 = P630,000,000.
Total investor-supplied
operating capital01

= Net plant & equipment + NOWC


= P750,000,000 + P630,000,000 = P1,380,000,000.

FCF02

= NOPAT02 - Net investment in operating capital


= P270,000,000 - P1,476,000,000 - P1,380,000,000 = P174,000,000.

7. Looking back at the income statement, we realize that the depreciation and amortization
expense can be found as the difference between EBITDA and EBIT.
Therefore, we need to
break down NOPAT to determine EBIT:
NOPAT
P7,800,000
P7,800,000
P13,000,000

=
=
=
=

EBIT(1 - T)
EBIT(1 - 0.4)
EBIT(0.6)
EBIT.

Now that we have EBIT, we can find the depreciation and amortization expense by
subtracting EBIT from EBITDA, which is given in the problem.
EBITDA
Depr. & Amort.
EBIT

P15,500,000
- ?????????
P13,000,000

Therefore, depreciation and amortization expense is equal to P2.5 million.


8. To get the firms interest expense, we must use the income statement to determine
earnings before taxes (EBT).
Then, we can subtract EBT from EBIT to find the interest
expense.

Taxes

EBIT
Int
EBT

P13,000,000
-??????????

NI

P 3,800,000

NI = EBT(1 - T)
P3,800,000 = EBT(0.6)
P6,333,333 = EBT.
Interest expense simply becomes the difference between EBIT and EBT.
EBIT Int = EBT
P13,000,000 Int = P6,333,333
P6,666,667 = Int.
So, interest expense is P6.67 million.
9. Remember, free cash flow (FCF) can be calculated as after-tax operating income less net
capital expenditures. Therefore,
FCF
FCF
FCF
FCF

=
=
=
=

EBIT(1 - T) Net capital expenditures


P13,000,000(1 - 0.4) P5,500,000
P 7,800,000 P5,500,000
P 2,300,000.

10. Recall, EVA is after-tax operating income less the after-tax capital costs.
EVA = EBIT(1 - T) AT capital costs
EVA = P7,800,000 - P5,900,000
EVA = P1,900,000.