(a) Compute net operating profit after tax (NOPAT) for 2013. Assume that the com
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Question
(a) Compute net operating profit after tax (NOPAT) for 2013. Assume that the combined federal and state statutory tax rate is 37%. (Round to the nearest whole number.)
(b) Compute net operating assets (NOA) for 2013 and 2012.
(c) Compute Costco’s RNOA, net operating profit margin (NOPM) and net operating asset turnover (NOAT) for 2013. (Do not round until final answer. Round two decimal places. Do not use NOPM x NOAT to calculate RNOA)
(d) Compute net nonoperating obligations (NNO) for 2013 and 2012.
(e) Compute return on equity (ROE) for 2013. (Do not round until final answer. Round answer two decimal places
(f) Infer the nonoperating return component of ROE for 2013. (Use answers from above to calculate. Round two decimal places.)
(g) What does the relation between ROE and RNOA suggest about Costco's use of equity capital?
Consolidated Statements of Earnings For Fiscal Years Ended ($ millions) September 1, 2013 September 2, 2012 August 28, 2011 Revenue Net Sales $102,870 $97,062 $87,048 Membership fees 2,286 2,075 1,867 Total revenue 105,156 99,137 88,915 Operating expenses Merchandise costs 91,948 86,823 77,739 Selling, general and administrative 10,104 9,518 8,691 Preopening expenses 51 37 46 Operating Income 3,053 2,759 2,439 Other income (expense) Interest expense (99) (95) (116) Interest income and other, net 97 103 60 Income before income taxes 3,051 2,767 2,383 Provision for income taxes 990 1,000 841 Net income including noncontrolling interests 2,061 1,767 1,542 Net income attributable to noncontrolling interests (22) (58) (80) Net income attributable to Costco $ 2,039 $ 1,709 $ 1,462Explanation / Answer
a) NOPAT
b) Net Operating Assets (NOA) for 2013 & 2012.
Operating Assets = Total Assets less Cash ; Operating Liabilities = Total Liabilites less short term and long tern notes. Net Operating Assets = Operating Assets less Operating Liabilities.
In this problem, since there is no information of financing activities and the amounts pertaining to it, it is assumed that the Long Term Debt is used for Operating Activities.
c) Computing RONA, NOPM and NOAT
The formulae that are used for
RONA = Net Income / (Fixed Assets + Net Working Capital)
NOPM = NOPAT / Sales
NOAT = Assets used to generate Revenues / Total Non Cash Assets.
d) Net Nonoperating Obligation
This is defined as excess of interest bearing debt over investments in non-operating assets. This can be positive (excess of debt over investment) or negative (excess of investments over debt).
e) ROE
The formula for ROE is Net Income / Shareholders' Equity
NOPAT: For 2013 Income before Taxes $ 3051 Less: Taxes @ 37% $ (1129) NOPAT $ 1922Related Questions
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