Last year KRJ Enterprises reported average short-term debt of $228, average current portion of long-term debt...

Last year KRJ Enterprises reported average short-term debt of $228, average current portion of long-term debt of $126, average long-term debt of $567, and average total stockholders’ equity of $1,809. It also reported operating earnings (EBIT) of $1,159 and an effective tax rate of 22%. What was the company’s return on invested capital for the year? Present your answer in percentage terms, rounded to two decimal places, e.g., 20.00%.

Expert Solution

Average short term debt = $228

Average current portion of long term debt = $126

Average long term debt = $567

Book Value of Debt = Average short term debt + Average current portion of long term debt + Average long term debt

= $228 + $126 + $567 = $921

Book Value of Equity = Average Stockholders' equity = $1,809

Book Value of Invested Capital = Book Value of Debt + Book Value of Equity = $921 + $1,809 = $2,730

EBIT = $1,159

Tax Rate = 22%

Net Operating Profit After Tax, NOPAT = EBIT *(1-Tax Rate)

NOPAT = $1,159 *(1-22%) = $904.02

Return on Invested capital, ROIC = NOPAT / Invested Capital = $904.02 / $2,730 = 33.11%

jeff jeffy answered 2 years ago

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