In: Finance
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
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