Question

Arlington Corporation's financial statements (dollars and shares are in millions) are provided here. Balance Sheets as of December 31 2019 2018 Assets Cash and equivalents $ 15,000 $ 13,000 Accounts receivable 35,000 25,000 Inventories 32,775 21,000 Total current assets $ 82,775 $ 59,000 Net plant and equipment 50,000 47,000 Total assets $132,775 $106,000 Liabilities and Equity Accounts payable $ 10,400 $ 8,000 Accruals 7,700 5,000 Notes payable 6,700 5,500 Total current liabilities $ 24,800 $ 18,500 Long-term bonds 20,000 20,000 Total liabilities $ 44,800 $ 38,500 Common stock (4,000 shares) 40,000 40,000 Retained earnings 47,975 27,500 Common equity $ 87,975 $ 67,500 Total liabilities and equity $132,775 $106,000 Income Statement for Year Ending December 31, 2019 Sales $216,000 Operating costs excluding depreciation and amortization 170,000 EBITDA $ 46,000 Depreciation & amortization 7,000 EBIT $ 39,000 Interest 1,850 EBT $ 37,150 Taxes (25%) 9,287.50 Net income $ 27,862.50 Dividends paid 7,387.50 Enter your answers in millions. For example, an answer of $25,000,000,000 should be entered as 25,000. Round your answers to the nearest whole number, if necessary. What was net operating working capital for 2018 and 2019? Assume that all cash is excess cash; i.e., this cash is not needed for operating purposes. 2018 $ million 2019 $ million What was Arlington's 2019 free cash flow? $ million Construct Arlington's 2019 statement of stockholders' equity. Statement of Stockholders' Equity, 2019 Common Stock Retained Earnings Total Stockholders' Equity Shares Amount Balances, 12/31/18 million $ million $ million $ million 2019 Net Income million Cash Dividends million Addition to retained earnings million Balances, 12/31/19 million $ million $ million $ million What was Arlington's 2019 EVA? Assume that its after-tax cost of capital is 10%. Round your answer to the nearest cent. $ million What was Arlington's MVA at year-end 2019? Assume that its stock price at December 31, 2019 was $25. Round your answer to the nearest cent. $ million

Answer 1

MVA = $12,025

Step-by-step explanation:

Step 1: Market value of equity (E)

P = Stock price = $25

N = Number of shares = 4,000

E = P * N = $25 * 4,000 = $100,000

Step 2: Market value of debt (D)

NP = Notes payable

LTD = Long-term debt

D = NP + LTD = $6,700 + $20,000 = $26,700

Step 3: Enterprise value (V)

V = E + D = $100,000 + $26,700 = $126,700

Step 4: Invested capital (K)

Common Equity = C = $87,975

K = NP + LTD + C = $6,700 + $20,000 + $87,975 = $114,675

Step 5: MVA computation

MVA = V - K = $126,700 - $114,675 = $12,025

Hope this helps!