Homework Answers
Residual Income = NOPAT - cost of capital (total assets - non interest bearing current liabilities)
| 12/31/2017 | 12/31/2018 | |
| Net Income | 740600 | 848980 |
| Add:Tax@35% | 398784.62 | 457143.08 |
| Earning before tax | 1139384.6 | 1306123.1 |
| Add:Interest | 2263700 | 320220 |
| Earning before interest | 3403084.6 | 1626343.1 |
| Less: tax @ 35% | 1191079.6 | 569220.08 |
| NOPAT | 2212005 | 1057123 |
Residual Income for 2017 = 2212005 - 10%(12423000 - 575900)
= 2212005 - 10%(11847100)
= 2212005 - 1184710
= 1027295
Residual Income for 2018 = 1057123 - 12%(11764300-619000)
= 1057123 - 0.12(11145300)
= 1057123 - 1337436
= - 280313.
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Consider the following information for Hiroole
Electronics:
12/31/2017
12/31/2018
Total assets
$12,153,000
$11,438,500
Noninterest-bearing current liabilities
549,300
581,000
Net income
766,500
883,820
Interest expense
2,320,500
360,340
Tax rate
40%
40%
Required rate of return
10%
12%
(a)
Evaluate the company in terms of residual income (RI), which is
equivalent to EVA since there are no adjustments for accounting
distortions. (Enter negative answers preceding either -
sign, e.g. -45 or in parentheses, e.g. (45).)
2017
2018
Residual income
$
$
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Calculate NOPAT, invested capital, and residual income for
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$
Invested capital
$
Residual income...
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12/31/2017
12/31/2018
Total assets
$12,153,000
$11,438,500
Noninterest-bearing current liabilities
549,300
581,000
Net income
766,500
883,820
Interest expense
2,320,500
360,340
Tax rate
40%
40%
Required rate of return
10%
12%
(a)
Evaluate the company in terms of residual income (RI), which is
equivalent to EVA since there are no adjustments for accounting
distortions. (Enter negative answers preceding either -
sign, e.g. -45 or in parentheses, e.g. (45).)
2017
2018
Residual income
$
$
Exercise 12-9 For fiscal year 2018, Hiroole Department Store had net income of $6,090,000. Interest expense was $2,283,750, and the company's tax rate on income was 40 percent. Total assets were $74,848,000, and noninterest-bearing current liabilities were $6,268,500. The company's cost of capital (required rate of return) is 10 percent. Calculate NOPAT, invested capital, and residual income for Hiroole Department Store. (Enter negative answers preceding either - sign, e.g. -45 or in parentheses, e.g. (45).) NOPAT $ Invested capital $...
For fiscal year 2018, Covington Department Store had net income
of $6,070,000. Interest expense was $2,276,250, and the company’s
tax rate on income was 40 percent. Total assets were $72,238,000,
and noninterest-bearing current liabilities were $6,049,900. The
company’s cost of capital (required rate of return) is 10
percent.
Calculate NOPAT, invested capital, and residual income for
Covington Department Store. (Enter negative answers
preceding either - sign, e.g. -45 or in parentheses, e.g.
(45).)
NOPAT
$
Invested capital
$
Residual income...
For fiscal year 2018, Walla Walla Department Store had net
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company’s tax rate on income was 40 percent. Total assets were
$80,351,000, and noninterest-bearing current liabilities were
$7,148,100. The company’s cost of capital (required rate of return)
is 10 percent.
Calculate NOPAT, invested capital, and residual income for Walla
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preceding either - sign, e.g. -45 or in parentheses, e.g.
(45).)
NOPAT
$
Invested capital
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