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Identify and Compute NOPAT Following is the income statement for Lowe’s Companies Inc. LOWE’S COMPANIES INC....

Identify and Compute NOPAT
Following is the income statement for Lowe’s Companies Inc.

LOWE’S COMPANIES INC.
Consolidated Statement of Earnings
Twelve Months Ended (In millions) Feb. 1, 2019
Net sales $114,094
Cost of sales 77,442
Gross margin 36,652
Expenses
Selling, general and administrative 27,861
Depreciation and amortization 2,363
Operating income 6,428
Interest expense, net 998
Pretax earnings 5,430
Income tax provision 1,728
Net earnings $3,702

Compute its net operating profit after tax (NOPAT) for the 12 months ended ended February 1, 2019, assuming a 22% total statutory tax rate.
Note: Round your answer to the nearest whole dollar.
$Answer

Solutions

Expert Solution

When calculating net operating profit after tax (NOPAT), first we removes Interest Expense and the effects of other non-operating activities from Net Income to arrive at a value that approximates the value of a firm's annual earnings.

Operating profit = EBIT (Earnings before interest and taxes)

Calculation for NOPAT

NOPAT = Operating profit x (1 - Tax Rate)
= $6428 × (1- 0.22)
= $6428 × 0.78
= $5013.84
= $5014 million


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