Question

LVMH Moët Hennessy Louis Vuitton SE (LVMH) is a French multinational luxury goods conglomerate headquartered in Paris. The following information is selected from their 2017 annual report.

(€ thousands)	2017	2016
Revenue	42,636	37,600
Operating income	8,113	6,904
Net interest expense and other nonoperating expense	179	432
Net income	5,616	4,363
Operating assets	67,246	58,504
Operating liabilities	26,714	24,340

LVMH has an income tax rate of approximately 30%

a. Compute LVMH’s net operating profit after taxes (NOPAT) for 2017 and 2016.
Round answers to the nearest whole number.

2016
2017

b. Compute LVMH’s net operating profit margin (NOPM) for each year.
Round answers to one decimal place. (Ex: 0.2345 = 23.5%)

2016
2017

c. Compute LVMH’s return on net operating assets (RNOA) for 2017.
Round answers to one decimal place. (Ex: 0.2345 = 23.5%)

Answer 1

Solution:

Part a –

NOPAT means Net Operating Profit after taxes. This profit does not include interest and other non operating expenses but after tax.

i.e. NOPAT = Operating Income x (1 – Tax Rate)

2016 NOPAT = 6,904,000 (1 – 0.30) = 4,832,800

2017 NOPAT = 8,113,000 (1 – 0.30) = 5,679,100

Part b –

Net Operating Profit Margin = NOPAT / Total Revenue x 100

2016 NOPM = 4,832,800 / 37,600,000 * 100 = 12.85% or 12.9%

2017 NOPM = 5,679,100 / 42,636,000 * 100 = 13.32% or 13.3%

Part c –

2017 Return on Net Operating Assets = NOPAT / Average Operating Assets x 100

= 5,679,100 / (67,246,000 + 58,504,000)/2 * 100

= 5,679,100 / 62,875,000 * 100

= 9%

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