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Compute NOPAT Selected income statement information for 2018 is presented below for Home Depot Inc. and...

Compute NOPAT Selected income statement information for 2018 is presented below for Home Depot Inc. and Lowe’s Companies Inc. Assume the statutory tax rate is 22%. Pretax Net Average Net Nonoperating Tax Operating Company ($ millions) Ticker Sales NOPBT Expense Expense Assets Home Depot HD $108,203 $15,219 $955 $3,366 $24,713 Lowe’s LOW 69,883 3,938 612 1,080 20,326 a. Compute the following measures for both companies. Measure Rounding Instructions Home Depot Lowe’s 1. Net operating profit (NOPAT) Round to nearest whole dollar Answer 103,882 Answer 68,191 2. Return on net operating assets (RNOA) Round percentage to one decimal place Answer Answer 3. Net operating profit margin (NOPM) Round percentage to one decimal place Answer Answer 4. Net operating asset turnover (NOAT) Round amount to two decimal places Answer Answer b. Indicate which of these two companies: 1. Is more profitable (in $s). Answer 2. Produces the higher profit margin (in %). Answer 3. Uses its NOA more efficiently. Answer 4. Produces the higher return on NOA. Answer:

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Expert Solution

Computation of net profit after tax, given tax rate at 22%

Particulars home depot Inc. Lowe's co inc.

Ticker Sales 108203 69833

NOPBT 15219 3938

Expenses 955 612

Expenses 2 3366 1080

Asset 24713 20326

(Repeating the question to get clarity on what is given in question)

1. NOPAT = Operating profit*(1-tax rate) =

A. 15219*(1-0.22) = 11870.8

B. 3938*(1-0.22) = 3071.6

A is better

2. RNOA = NOPAT/ Net operating asset

A. 11870.8/24713 = 0.48 or 48%

B. 3071.64/68191.2 = 0.15 or 15.1%

A is better

(As there is no details of net operating asset, the value of asset is treated as NOA, formula for NOA = Operating asset - Operating liability)

3. NOPM = Revenue - Discounts and expenses

A. 108203-(955+3366) = 103882

B. 69883-(612+1080) = 68191

A is better

4. NOAT = Sales/operating assets

A. 108203/24713 = 4.4

B. 69833/20326 = 3.4

A is better

The efficiency and performance of two companies A (Home depot Inc) and B (Lowe's company Inc) are to be determined with favourable results.

These gives the ratio and values through which companies strength and weakness are analysed by comparison between competitive company as well as with benchmarks established

jeff jeffy answered 2 years ago
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