ANSWER:
(1)
net operating income before tax = $6090000/60% = $10150000
net operating income before interest = $10150000 + $2283750 = $12433750
NOPAT = $12433750 - 40% = $7460250
(2)
Invested capital = total assets - non-interest-bearing current liabilities
= $74848000 - $6268500
= $68579500
(3)
Residual income = net income - (invested capital x rate of return)
= $6090000 - ($68579500 x 10%)
= - $767950
PROFITABILITY:
Return on income = NOPAT/invested capital
= $7460250/$68579500
= 10.88%
The company appears profitable as Company is earning at a rate above cost of capital/required rate of return
Exercise 12-9 For fiscal year 2018, Hiroole Department Store had net income of $6,090,000. Interest expense...
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