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11. The calculation of a firm's Market Value Added (MVA) and EconomicValue Added (EVA) Taj, your...

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11. The calculation of a firms Market Value Added (MVA) and EconomicValue Added (EVA) Taj, your newly appointed boss, has ta
Galaxy Corp. Balance Sheet December 31, Year 2 Assets: Year 2 Year 1 $438,900 $399,000 Cash and cash equivalents Receivables
To facilitate your analysis, complete the following table, and use the results to answer the related questions. (Note: Round
Using the change in Galaxys EVA as the decision criterion, which type of investment recommendation should you make to your c
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
Galaxy Corp. Balance Sheet December 31, Year 2 Assets: Year 2 Year 1 $438,900 $399,000 Cash and cash equivalents Receivables Inventory 1,463,000 2,560,250 Current assets 1,330,000 2,327,500 $4,056,500 2,593,500 $6,650,000 $4,462,150 2,852,850 $7,315,000 Net fixed assets Total current assets Liabilities and Equity: Accounts payable $1,097,250 Accruals 713,213 Notes payable 1,536,150 Total current liabilities $3,346,613 Long-term debt 1,408,138 Total liabilities $4,754,750 Common stock ($1 par) 512,050 Retained earnings 2,048,200 Total equity $2,560,250 Total liabilities and equity $7,315,000 Shares outstanding 512,050 Weighted average cost of capital 7.98% $997,500 648,375 1,396,500 $3,042,375 1,280,125 $4,322,500 465,500 1,862,000 $2,327,500 $6,650,000 465,500 7.30%
To facilitate your analysis, complete the following table, and use the results to answer the related questions. (Note: Round all percentage change answers to two decimal places. If a dollar value is below $100, round your answer to two decimal places. If your answer is negative use a minus (-) sign.) Company Growth and Performance Metrics Metric Year 1 Percentage Change Sales Year 2 General Metrics $7,350,000 $595,350 $7,000,000 $504,000 $749,000 % $ $2,651,687 $ $1.08 $0.70 $ $5.00 0.00% 3.7394 $ $20.74 $19.75 Net Income Net cash flow (NCF) Net operating working capital (NOWC) Earnings per share (EPS) Dividends per share (DPS) Book value per share (BVPS) Cash flow per share (CFPS) Market price per share MVA Calculation Market value of equity Book value of equity Market Value Added (MVA) EVA Calculation Net operating profit after-tax (NOPAT) Investor-supplied operating capital Weighted average cost of capital Dollar cost of capital Return on invested capital (ROIC) Economic Value Added (EVA) 15.51 $2,560,250 $2,327,500 $6,866,125 $727,650 $ 10.00% 7.98% 7.304 $ 20.254 8.63% $288,438 $ Using the change in Galaxy's EVA as the decision criterion, which type of investment recommendation should you make to your clients?
Using the change in Galaxy's EVA as the decision criterion, which type of investment recommendation should you make to your clients? A hold recommendation A sell recommendation O A buy recommendation Which of the following statements are correct? Check all that apply. Galaxy's NCF is calculated by adding its annual depreciation and amortization expense to the corresponding year's EBITDA. Investor-supplied operating capital is recorded as accounts payable, accruals, and short-term investments. For any given year, one way to compute Galaxy's EVA is as the difference between its NOPAT and the product of its operating capital and its weighted average cost of capital. The percentage change in Galaxy's EVA indicates that management has increased its value Galaxy's net income is growing at a rate greater than its sales. This could imply that either its revenues are growing more quickly than its expenses or that management is being effective in managing its costs while achieving the reported growth in sales. Other things remaining constant, either event should increase the value of the firm. Grade It Now Save & Continue Continue without saving

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