Please calculate Return On Capital for year 2005 to 2007 using formula = NOPAT/(
ID: 2785664 • Letter: P
Question
Please calculate Return On Capital for year 2005 to 2007 using formula = NOPAT/(BV equity +Debt)
Exhibit 4 AirThread Income Statement (SMM) 2005 2006 2007 Operating Results Service Revenue Pl 2,827.03,214.4 3,679.2 267.0 3,030.83,473.2 3,946.3 203.7 258Z4 us: Equipment Sales Total Revenue 639.7 568.9 Less: Selling, General & Administrative 1217.7 1399.6 Less: System Operating Expenses Less: Cost of Equipment Sold 604.1 511.9 640.2 1,555.6 865.01,033.3 582.3 451.1 84.7 90.0 83.1 7.0 546.5 216.7 329.8 10.515.0-^ 697.0 490.1 206.9 84.9 66.7 18.1 EBITDA Less: Depreciation & Amortization EBIT Less: Interest Expense Plus: Equity in Earnings of Affiliates Plus: Gains (Losses) on Investments Plus: Other Income EBT Less: Taxes Income Before Minoritv Interest Less: Minority Interest Net Income 555.5 309.5 93.7 93.1 50.8 545 (46.6) 261.3 313.1 95.9 120.6 192.5 165.5 15.1 $155.0 179.5 $314.7Explanation / Answer
Tax rate:
2005 = tax/EBT = 95.9/261.3 = 36.7%
NOPAT = EBIT * (1- tax rate) = 206.9 * (1-0.367) = 206.9 * 0.633 = $130.97
BV equity + debt = (1375+1366+41.9) + 1001.4 = $3,784.3
Return on capital = 130.97/3784.3 = 0.0346 = 3.46%
Tax rate:
2006 = tax/EBT = 120.6/313.1 = 38.51%
NOPAT = EBIT * (1- tax rate) = 309.5 * (1-0.385) = 309.5 * 0.615 = $190.34
BV equity + debt = (1378.9+1614.4+36.7) + 1001.8 = $4,031.8
Return on capital = 190.34/4031.8 = 0.0472 = 4.72%
Tax rate:
2007 = tax/EBT = 216.7/546.5 = 39.65%
NOPAT = EBIT * (1- tax rate) = 206.9 * (1-0.396) = 451.1 * 0.604 = $272.46
BV equity + debt = (1404.1+1792.1+43.4) + 1002.3 = $4,241.9
Return on capital = 272.46/4241.9 = 0.0642 = 6.42%