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Tristan, your newly appointed boss, has tasked you with evaluating the following financial data for Extensive Enterprise Inc. to determine how Extensive'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 Extensive'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. Extensive Enterprise Inc. Income Statement January 1 - December 31, Year 2 Year 2 Sales $10,925,000 Expenses 8,740,000 EBITDA 2,185,000 Depreciation and amortization expense 382,375 EBIT 1,802,625 Interest expense 327,750 EBT 1,474,875 Tax expense (40%) 589,950 Net income $884,925 Year 1 $9,500,000 7,790,000 1,710,000 332,500 1,377,500 237,500 1,140,000 456,000 Year 1 $541,500 1,805,000 3,158,750 5,505,250 3,519,750 59,025,000 Extensive Enterprise Inc. Balance Sheet December 31, Year 2 Assets: Year 2 Cash and cash equivalents 5649,800 Receivables 2,166,000 Inventory 3,790,500 Current assets 6,606,300 Net fixed assets 4,223,700 Total assets $10,830,000 Liabilities and Equity: Accounts payable $1,624,500 Accruals 1,055,925 Notes payable 2,274,300 Total current liabilities 4,954,725 Long-term debt 2,084,775 Total liabilities 7,039,500 Common stock (S1 par) 758,100 Retained earnings 3,032,400 Total equity 3,790,500 Total debt and equity $10,830,000 $684,000 Common dividends Addition to retained eamings "Excludes depreciation and amortization $530,955 $353,970 $410,400 $273,600 51,353,750 879,938 1,895, 250 4,128,938 1,737,313 5,866,250 631,750 2,527,000 3,158,750 59,025,000 Shares outstanding Weighted average cost of capital 758,100 7.98% 631,750 7.30% To facilitate your analysis, complete the following table, and use the results to answer the related questions. Round your percentage change answers to two decimal places. Company Growth and Performance Metrics Metric Year 1 Year 2 General Metrics Using the change in Extensive's EVA as the decision Percentage criterion, which type of investment recommendation Change should you make to your clients? O A buy recommendation 0 A sell recommendation O A hold recommendation Sales $10,925,000 $884,925 Net income $9,500,000 S684,000 $1,016,500 $3,925,875 $1.08 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 S0.70 $5.00 0.00% 3.73% $20.74 $19.75 MVA Calculation 26.02% Market value of equity Book value of equity Market Value Added (MVA) Which of the following statements are correct? Check all that apply. The percentage change in Extensive's MVA indicates that its management has increased the firm's value. For any given year, one way to compute Extensive's EVA is as the difference between its NOPAT (such as s826,500) and the product of its operating capital ($6,791,312) and its weighted average cost of capital (57.30). Extensive's NCF is calculated by adding its annual interest expense to the corresponding year's net income. Investor-supplied operating capital is recorded as accounts payable, accruals, and short-term investments. The percentage change in Extensive's EVA indicates that management has increased its $3,790,500 $3,158,750 $9,318,313 EVA Calculation $1,081,575 20.00% 7.98% 7.30% 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) 31.18% 9.04% value $431,113 Tristan, your newly appointed boss, has tasked you with evaluating the following financial data for Extensive Enterprise Inc. to determine how Extensive'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 Extensive'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. Extensive Enterprise Inc. Income Statement January 1 - December 31, Year 2 Year 2 Sales $10,925,000 Expenses 8,740,000 EBITDA 2,185,000 Depreciation and amortization expense 382,375 EBIT 1,802,625 Interest expense 327,750 EBT 1,474,875 Tax expense (40%) 589,950 Net income $884,925 Year 1 $9,500,000 7,790,000 1,710,000 332,500 1,377,500 237,500 1,140,000 456,000 Year 1 $541,500 1,805,000 3,158,750 5,505,250 3,519,750 59,025,000 Extensive Enterprise Inc. Balance Sheet December 31, Year 2 Assets: Year 2 Cash and cash equivalents 5649,800 Receivables 2,166,000 Inventory 3,790,500 Current assets 6,606,300 Net fixed assets 4,223,700 Total assets $10,830,000 Liabilities and Equity: Accounts payable $1,624,500 Accruals 1,055,925 Notes payable 2,274,300 Total current liabilities 4,954,725 Long-term debt 2,084,775 Total liabilities 7,039,500 Common stock (S1 par) 758,100 Retained earnings 3,032,400 Total equity 3,790,500 Total debt and equity $10,830,000 $684,000 Common dividends Addition to retained eamings "Excludes depreciation and amortization $530,955 $353,970 $410,400 $273,600 51,353,750 879,938 1,895, 250 4,128,938 1,737,313 5,866,250 631,750 2,527,000 3,158,750 59,025,000 Shares outstanding Weighted average cost of capital 758,100 7.98% 631,750 7.30% To facilitate your analysis, complete the following table, and use the results to answer the related questions. Round your percentage change answers to two decimal places. Company Growth and Performance Metrics Metric Year 1 Year 2 General Metrics Using the change in Extensive's EVA as the decision Percentage criterion, which type of investment recommendation Change should you make to your clients? O A buy recommendation 0 A sell recommendation O A hold recommendation Sales $10,925,000 $884,925 Net income $9,500,000 S684,000 $1,016,500 $3,925,875 $1.08 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 S0.70 $5.00 0.00% 3.73% $20.74 $19.75 MVA Calculation 26.02% Market value of equity Book value of equity Market Value Added (MVA) Which of the following statements are correct? Check all that apply. The percentage change in Extensive's MVA indicates that its management has increased the firm's value. For any given year, one way to compute Extensive's EVA is as the difference between its NOPAT (such as s826,500) and the product of its operating capital ($6,791,312) and its weighted average cost of capital (57.30). Extensive's NCF is calculated by adding its annual interest expense to the corresponding year's net income. Investor-supplied operating capital is recorded as accounts payable, accruals, and short-term investments. The percentage change in Extensive's EVA indicates that management has increased its $3,790,500 $3,158,750 $9,318,313 EVA Calculation $1,081,575 20.00% 7.98% 7.30% 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) 31.18% 9.04% value $431,113

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