a. What is Mary\'s federal tax liability? b. What is her marginal tax rate? c. W

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a. What is Mary's federal tax liability? b. What is her marginal tax rate? c. What is her average tax rate? ensive/Spreadsheet Problem 3-19 FINANCIAL STATEMENTS, CASH FLOW, AND TAXES Laiho Industries's 2015 and 2016 balance sheets (in thousands of dollars) are shown. 2015 89,.725 85,527 2016 $102,850 103,365 38,444 244,659 67,165 311,824 Cash Accounts recelvable Inventories $210,234 Total current assets Net fixed assets Total assets 252670 30,761 30,477 16,717 $ 77.955 76,264 $154,219 100,000 57,605 $157,605 311824 5 23,109 22,656 Accounts payable Notes payable s 59,982 63,914 $123,896 90,000 38,774 Total current liabilities Long-term debt Total liabilities Common stock Retained earnings Total common equity Total liabilities and equity Sales for 2016 were $455,150,000, and EBITDA was 15% of sales. Furthermore, depreciation and amortization were 11% of net fixed assets, interest was $8,575,000, the corporate tax rate was 40%, and Laiho pays 40% of its net income as dividends. Given this information, construct the firm's 2016 income statement. a. b. Construct the statement of stockholders' equity for the year ending December 31, 2016, and the 2016 statement of cash flows. Calculate 2015 and 2016 net operating working capital (NOWC) and 2016 free cash flow (FCF). c. d. If Laiho increased its dividend payout ratio, what effect would this have on corporate taxes paid? What effect would this have on taxes paid by the company's shareholders? e. Assume that the firm's after-tax cost of capital is 10.5%. What is the firm's 2016 EVA? f. Assume that the firm's stock price is $22 per share and that at year-end 2016 the firm has 10 million shares outstanding. What is the firm's MVA at year-end 2016?

Explanation / Answer

E) EVA=EBIT(1-tax)-Cost of capital * Capital employed

EBIT=EBITDA-Depreciation & Amortisation

EBIT=455150000*15%-8301 (Depreciation=67165/89*11=8301)

EBIT=68264199

EBIT(Net of Tax)=68264199*(1-0.40)=40958519

NOPAT=40958519

Capital Employed=Equity+Retained earnings+Long term Debt=100000+57605+76264=233869(in thousands)

EVA=NOPAT-Cost of Capital*Capital Employed

EVA=40958519-10.5%*233869000

EVA=16402274

F) MVA=Market Value of Shares -Book value of Shares

Market Value=22*10000000=220000000

Book Value of Shares=157605000

MVA=220000000-157605000

MVA=62395000

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