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

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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

jeff jeffy answered 2 years ago

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