For the year 2012, Richard’s Backpacks had income as follows: Total assets were
ID: 2499839 • Letter: F
Question
For the year 2012, Richard’s Backpacks had income as follows:
Total assets were $1,604,000 and non-interest-bearing current liabilities were $4,000. The company has a required of return on capital equal to 12%.
1) Calculate NOPAT for Richard’s Backpacks.
2) Calculate invested capital for Richard’s Backpacks.
3) Calculate ROI for Richard’s Backpacks.
Sales $800,000 Less: Cost of Goods Sold 480,000 Selling and Administrative Expenses 10,000 Interest Expense 2,000 Income Before Taxes 308,000 Less Income Taxes 61,600 Net Income $246,400Explanation / Answer
Answer :
Sales $800,000
Less: Cost of Goods Sold 480,000
Selling and Administrative Expenses 10,000
Net operating profit before interest and taxes 310000
Less Tax 20%(see note for tax rate) 62000
Net Operating profit after tax (NOPAT) 248000
Note: tax rate = (61600/308000*100) = 20%
2) Invested capital for Richard’s Backpacks.
Total assets $1,604,000
Less current liabilities 4000
Invested capital 1600000
3. ROI for Richard’s Backpacks.
Net Operating income after tax /invested capital * 100 = 248000/1600000 = 15.5 %