The 2016 income statement for the East Division of Big Company is as follows: Sa

Question

The 2016 income statement for the East Division of Big Company is as follows: Sales $1,800,000 Operating expenses 1,380,000 Net operating income 420,000 Interest expense 120,000 Earnings before taxes 300,000 Income tax expense (40%) 120,000 Net income $180,000 This division’s invested capital is $4,000,000. How much is the East Division’s NOPAT for 2016? Answer: How much is the East Division’s return on investment (ROI) for 2016? Answer: The 2016 income statement for the East Division of Big Company is as follows: Sales $1,800,000 Operating expenses 1,380,000 Net operating income 420,000 Interest expense 120,000 Earnings before taxes 300,000 Income tax expense (40%) 120,000 Net income $180,000 This division’s invested capital is $4,000,000. How much is the East Division’s NOPAT for 2016? Answer: How much is the East Division’s return on investment (ROI) for 2016? Answer:

Explanation / Answer

ROI

ROI = Net Profit / Invested Capital

= 180000 / 4000000

= 4.5%

Particulars Amt Net Operating Income 420000 Less: Tax at 40% 168000 NOPAT 252000

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