Why do financial analysts prefer NOPAT as a measure of profit, vs. more accounting based measures such as EBIT or net income?
Answer to relevant QuestionsWhat does net operating working capital (NOWC) tell us about a firm's effectiveness in managing its balance sheet? When calculating a firm's cost of equity, is it ever appropriate to adjust a firm's historical beta? Explain. Calculate UTX's days sales outstanding and inventory turnover ratios for each year 2010-2012. Calculate UTX's economic value-added (EVA) for each year 2010-2012. Use the NOPAT you calculated in problem 27 and the WACC you calculated in problem 31 for each year's EVA calculation. Are stocks with low relative valuation ratios (or high yields) always "good deals?" Explain.
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