C6-1_MHLWM

# C6-1_MHLWM - Chapter 6 The Role of Financial Information in...

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Chapter 6 Assigned problem or case: Problem or case title: Tab P6-9 Calculating value creation by two companies P6-9 P6-12 Calculating sustainable earnings P6-12 P6-13 Krispy Kreme Doughnuts: Valuing abnormal earnings P6-13 C6-1 Illinois Tool Works: Valuing abnormal earnings C6-1 The Role of Financial Information in Valuation, Cash Flow Analysis, and Credit Risk Assessment

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P6-9 Calculating value creation by two companies This spreadsheet consists of: 1) Data table for company A (beginning row 8) 2) Data table for company B (beginning row 19) Company A 2010 2011 2012 2013 2014 NOPAT \$ 66,920 \$ 79,632 \$ 83,314 \$ 89,920 \$ 92,690 \$ 478,000 \$ 504,000 \$ 541,000 \$ 562,000 \$ 598,000 Cost of equity capital 0.152 0.167 0.159 0.172 0.166 Company B 2010 2011 2012 2013 2014 NOPAT \$ 192,940 \$ 176,341 \$ 227,700 \$ 198,900 \$ 282,964 \$ 877,000 \$ 943,000 \$ 989,999 \$ 1,020,000 \$ 1,199,000 Cost of equity capital 0.188 0.179 0.183 0.175 0.186 BV t-1 BV t-1
P6-12 Calculating sustainable earnings Colonel Electric Company Comparative Income Statements For Year Ended December 31 (\$ in millions) 2013 2012 2011 Revenues: Sales of goods \$ 54,196 \$ 53,177 \$ 52,767 Sales of services 11,923 10,836 8,863 Royalties and fees 1,629 753 783 Total revenues 67,748 64,766 62,413 Costs and expenses: Cost of goods sold (24,594) (24,308) (22,775)

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