Division 3 of Baritune Enterprises reported sales of $820,000, NOPAT totaling $6

Question

Division 3 of Baritune Enterprises reported sales of $820,000, NOPAT totaling $61,500, interest expense of $8,000, and invested capital totaling $512,500. Its income tax rate is 30 percent. As it pertains to evaluating investment centers, how much is Division 3’s profit margin?

A.        12.0%

B.         7.5%

C.         8.2%

D.        1.6%

Hardin Division of WestCo has sales of $300,000 and NOPAT of $15,000. The company’s invested capital is $240,000 and its non-interest-bearing current liabilities are $20,000. What is Hardin Division’s profit margin as it relates to investment center performance evaluation?

A.        8.0%

B.         6.25%

C.         5.0%

D.        6.8%

Division 3 of Baritune Enterprises reported sales of $820,000, NOPAT totaling $61,500, interest expense of $8,000, and invested capital totaling $512,500. Its income tax rate is 30%. As it pertains to evaluating investment centers, how much is Division 3’s investment turnover?

            A.        1.60

B.         7.50

C.         12.00

D.        0.625

Explanation / Answer

1. Profit Margin =

(Net income - Interest after taxes) / Sales          

           = ($61,500 + [$8,000*70%]) / $820,000 = 8.18%

Hence Ans. is C. 8.2%

2.    B.    6.25%

3.

Turnover = Sales / Investment

          Turnover = $820,000 / $512,500 = 1.6 times

Ans. is A. 1.6 times

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