Question

For fiscal year 2012, Katherine’s Department Store had net income of $4,000,000. Interest expense was $2,000,000, and the company’s tax rate on income was 40 percent. Total assets were $76,000,000, and noninterest-bearing current liabilities were $7,000,000. The company’s cost of capital (required rate of return) is 10 percent.

Required
Calculate NOPAT, invested capital, and residual income for Katherine’s Department Store, and comment on the company’s profitability.



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  • CreatedSeptember 23, 2013
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