Question
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 | $
| ||
| Residual income | $
|
Comment on the company’s profitability.
| The company appears
|
Answers
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
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