Compute the mva, Compute the MVA as of 12/31/X0, and

Compute the mva

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(Refer to the INSIGHTS box on pages 94-95 before attempting this problem. Notice that the calculations called for here do not involve cost of capital.) William Edwards, Inc. (WEI) had one million shares of common stock outstand- ing on 12/31/20X0. The stock had been sold for an average of $8.00 per share and had a market price of $13.25 per share on that date. WEI also had a balance of $5.0 million in its retained earnings account on that date. The following projection has been made for WEI's next five years of operations:

Year	Net Income	Dividends/Share	Shares Issued	Average Issue Price	Stock Price 12/31
20X1	$700,000	$.20	None	NA	$13.75
20X2	840,000	.22	50,000	$14.00	14.25
20X3	750,000	.24	100,000	13.50	13.80
20X4	900,000	.26	50,000	14.50	15.00
20X5	860,000	.28	None	NA	15.40

Compute the MVA as of 12/31/X0, and compute EVA®, the change in MVA, as a result of each subsequent year's activity. (Assume that all shares issued during any given year received the dividends declared that year.) Comment on management's projected performance over the five-year period. What would you do if you repre- sented a majority of the stockholders? Would the result have been different before MVA/EVA analysis?

Reference no: EM131007657

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Compute the mva

Reference no: EM131007657

Reference no: EM131007657

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