For fiscal year 2018, Walla Walla Department Store had net
income of $6,010,000. Interest expense was $2,253,750, and the
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
Walla Department Store. (Enter negative answers
preceding either - sign, e.g. -45 or in parentheses, e.g.
(45).)
NOPAT | $ | ||
Invested capital | $ | ||
Residual income | $ |
Comment on the company’s profitability.
The company appears
profitablenot profitable . |
NOPAT = 6,010,000 + (2,253,750 - 40%) = 7,362,250 |
|
Invested capital = 80,351,000 - 7,148,100 = 73,202,900 |
|
Residual income = NOPAT - Required return = 7,362,250 - (73,202,900*10%) = 41,960 |
Profitable
Comment if you face any issues
For fiscal year 2018, Walla Walla Department Store had net income of $6,010,000. Interest expense was $2,253,750, and th...
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