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Market value added, Market to book ratio, EVA & ROC

18 - 4
Look again at table 18.11 at the end of fiscal 2008 Estee Lauder had 195 million shares outstanding with share price of $45.50. The company's weighted-average cost of capital was about 10%. Calculate
a. Market value added
b. Market to book ratio
c. Economic value added
d. Return on capital

End of Year Start of Year
Balance Sheet
Assets
Current assets:
Cash and Marketable securities 402 254
Accounts recievable 1039 861
Inventories 987 856
Other curreny assests 360 269
Total current assets 2788 2240

Fixed assets:
tangible fixed assets
Property, plant, and exuipment 2394 2113
less accumlated depreciation 1351 1232
net tangible fixed assets 1043 881

long term investments 24 22
other long term assess 1157 984
total assets 5012 4127

Liabilities ans shareholders' Equity
Current Liabilities:
Debt due for repayment 119 60
Accounts payable 1581 1440
Total current liabilities 1700 1500

long-term debt 1078 1028
other long-term liabilities 581 398

Total liabilities 3359 2926

Total shareholders' equity 1659 1426
total liabilities and shareholders' equity 5012 4127

Income Statement
Net sales 7911
Cost of goods sold 1997
Selling, general, and administrative expenses 4852
Depreciation 251
Earnings before interest and taxes (EBIT) 811
Interest expense 67
taxable income 744
tax 260
Minority Interest 10
Net Income

Dividends 107
Addition to retained earnings 367

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Solution Summary

The solution computes Market value added, Market to book ratio, Economic value added and Return on capital

$2.19