Homework Answers
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
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Exercise 12-9 For fiscal year 2018, Hiroole Department Store had net income of $6,090,000. Interest expense...
For fiscal year 2018, Covington Department Store had net income of $6,070,000. Interest expense was $2,276,250,...
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 income of $6,010,000. Interest expense was $2,253,750, and th...
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
$...
Exercise 12-8 For fiscal year 2017, Golden Products had income as follows: $54,000,000 Sales Less: Cost...
Exercise 12-8 For fiscal year 2017, Golden Products had income as follows: $54,000,000 Sales Less: Cost of goods sold Selling and administrative expense Interest expense Income before taxes Less income taxes Net income 38,200,000 5,670,000 1,030,000 9,100,000 3,185,000 $5,915,000 Total assets were $95,000,000, and noninterest-bearing current liabilities were $3,500,000. The company has a required rate of return on invested capital equal to 12 percent. Calculate NOPAT, invested capital, and ROI for Golden Products. (Round ROI to 2 decimal places, e.g....
Consider the following information for Hiroole Electronics: 12/31/2017 12/31/2018 Total assets $12,1...
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
$
$
For fiscal year 2017, Crown Point Products had income as follows: Sales $55,600,000 Less: Cost of...
For fiscal year 2017, Crown Point Products had income as
follows:
Sales
$55,600,000
Less:
Cost
of goods sold
38,800,000
Selling and administrative expense
5,760,000
Interest expense
1,090,000
Income before taxes
9,950,000
Less income taxes
3,482,500
Net income
$6,467,500
Total assets were $99,000,000, and noninterest-bearing current
liabilities were $3,300,000. The company has a required rate of
return on invested capital equal to 10 percent.
Calculate NOPAT, invested capital, and ROI for Crown Point
Products. (Round ROI to 2 decimal places, e.g....
For fiscal year 2017, Sweetwater Products had income as follows: Sales $54,500,000 Less: Cost of goods...
For fiscal year 2017, Sweetwater Products had income as
follows:
Sales
$54,500,000
Less:
Cost of goods sold
38,200,000
Selling and administrative expense
5,750,000
Interest expense
1,010,000
Income before taxes
9,540,000
Less income taxes
3,339,000
Net income
$6,201,000
Total assets were $99,000,000, and noninterest-bearing current
liabilities were $3,500,000. The company has a required rate of
return on invested capital equal to 11 percent.
Calculate NOPAT, invested capital, and ROI for Sweetwater Products.
(Round ROI to 2 decimal places, e.g.
15.25%.)
NOPAT...
Accustart Hospital is a division of Superior Healthcare that is organized as an investment center. In...
Accustart Hospital is a division of Superior Healthcare that is organized as an investment center. In the past year, the hospital reported an after-tax income of $3,550,000. Total interest expense was $1,680,000, and the hospital’s tax rate was 35 percent. Hospital assets totaled $34,800,000, and noninterest-bearing current liabilities were $11,000,000. Superior has established a required rate of return equal to 18 percent of invested capital. Calculate the residual income/EVA of Accustart Hospital. (Enter negative answers preceding either - sign, e.g....
Sipacore Hospital is a division of Superior Healthcare that is organized as an investment center. In...
Sipacore Hospital is a division of Superior Healthcare that is organized as an investment center. In the past year, the hospital reported an after-tax income of $3,600,000. Total interest expense was $1,700,000, and the hospital’s tax rate was 35 percent. Hospital assets totaled $35,300,000, and noninterest-bearing current liabilities were $11,100,000. Superior has established a required rate of return equal to 17 percent of invested capital. Calculate the residual income/EVA of Sipacore Hospital. (Enter negative answers preceding either - sign, e.g....
Consider the following information for Penny Worth Electronics: Total assets Noninterest-bearing current liabilities Net income Interest...
Consider the following information for Penny Worth Electronics: Total assets Noninterest-bearing current liabilities Net income Interest expense Tax rate Required rate of return 12/31/2017 12/31/2018 $12,423,000 $11,764,300 575,900 619,000 740,600 848,980 2,263,700 320,220 35% 35% 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
Toy Co Mills is a division of Iowa Woolen Products. For the most recent year, Toy Co had net income of $20,600,000. Incl...
Toy Co Mills is a division of Iowa Woolen Products. For the most
recent year, Toy Co had net income of $20,600,000. Included in
income was interest expense of $1,490,000. The operation’s tax rate
is 40 percent. Total assets of Toy Co Mills are $236,000,000,
current liabilities are $52,000,000, and $35,000,000 of the current
liabilities are noninterest bearing.
Calculate NOPAT, invested capital, and ROI for Toy Co Mills.
(Round ROI to 2 decimal places, e.g.
15.25%.)
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
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
$...
Exercise 12-8 For fiscal year 2017, Golden Products had income as follows: $54,000,000 Sales Less: Cost of goods sold Selling and administrative expense Interest expense Income before taxes Less income taxes Net income 38,200,000 5,670,000 1,030,000 9,100,000 3,185,000 $5,915,000 Total assets were $95,000,000, and noninterest-bearing current liabilities were $3,500,000. The company has a required rate of return on invested capital equal to 12 percent. Calculate NOPAT, invested capital, and ROI for Golden Products. (Round ROI to 2 decimal places, e.g....
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
$
$
For fiscal year 2017, Crown Point Products had income as
follows:
Sales
$55,600,000
Less:
Cost
of goods sold
38,800,000
Selling and administrative expense
5,760,000
Interest expense
1,090,000
Income before taxes
9,950,000
Less income taxes
3,482,500
Net income
$6,467,500
Total assets were $99,000,000, and noninterest-bearing current
liabilities were $3,300,000. The company has a required rate of
return on invested capital equal to 10 percent.
Calculate NOPAT, invested capital, and ROI for Crown Point
Products. (Round ROI to 2 decimal places, e.g....
For fiscal year 2017, Sweetwater Products had income as
follows:
Sales
$54,500,000
Less:
Cost of goods sold
38,200,000
Selling and administrative expense
5,750,000
Interest expense
1,010,000
Income before taxes
9,540,000
Less income taxes
3,339,000
Net income
$6,201,000
Total assets were $99,000,000, and noninterest-bearing current
liabilities were $3,500,000. The company has a required rate of
return on invested capital equal to 11 percent.
Calculate NOPAT, invested capital, and ROI for Sweetwater Products.
(Round ROI to 2 decimal places, e.g.
15.25%.)
NOPAT...
Consider the following information for Penny Worth Electronics: Total assets Noninterest-bearing current liabilities Net income Interest expense Tax rate Required rate of return 12/31/2017 12/31/2018 $12,423,000 $11,764,300 575,900 619,000 740,600 848,980 2,263,700 320,220 35% 35% 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
Toy Co Mills is a division of Iowa Woolen Products. For the most
recent year, Toy Co had net income of $20,600,000. Included in
income was interest expense of $1,490,000. The operation’s tax rate
is 40 percent. Total assets of Toy Co Mills are $236,000,000,
current liabilities are $52,000,000, and $35,000,000 of the current
liabilities are noninterest bearing.
Calculate NOPAT, invested capital, and ROI for Toy Co Mills.
(Round ROI to 2 decimal places, e.g.
15.25%.)
NOPAT
$
Invested capital...
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