This problem was already solved, however, I am having trouble understanding how you calculated RNOA. My book is telling me that RNOA $=$ Net operating profits after tax $($NOPAT$)/$ Average net operating assets $($NOA$).$ Part $3$ below caluclates RNOA, can you elaborate where the numbers came from?

Do the assigned problems using Summer Peebles, Inc.$$s condensed $2014$ financial data below:

Assets:

Current Assets $$250,000\mathrm{.}00$

Noncurrent Assets $$1,750,000\mathrm{.}00$

Total Assets $$2,000,000\mathrm{.}00$

Liabilities and Equity:

Current Liabilities$$200,000\mathrm{.}00$

Noncurrent Liabilities $(8\%$ Bonds$)$ $$675,000\mathrm{.}00$

Common Stockholders' Equity $$1,125,000\mathrm{.}00$

Total Liabilities and Equity $$2,000,000\mathrm{.}00$

Additional Information:

Net income for $2014$ is $$157,500.$

Income tax rate is $50\%.$

Amounts for total assets and shareholders' equity are the same for $2013$ and $2014.$ All assets and current liabilities are considered to be operating. Required: Determine whether leverage $($from long$-$term debt$)$ benefits Rose's shareholders. $($Hint: Examine ROCE with and without leverage.$)$ Compute the NOPAT and RNOA $($use ending NOA$).$ Demonstrate the favorable effect of leverage given the disaggregation of ROCE and your answer to part $($B$).$

Here$$s the best way to solve it$.$

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$1.$ No$,$ shareholder's do not benefit from leverage as the ROCE without leverage is high.

ROCE with leverage $=157500/1800000*100=8\mathrm{.}75$

ROCE without leverage $=184500/1800000=10\mathrm{.}25$

$2.$ NOPAT $=($ Net income $+$ taxes $+$ interest$)*(1-$T$)$

$=(157500+157500+54000)*(1-0\mathrm{.}5)=184500$$

$3.$ RNOA $=$ return on net assets $=157500/[(2000000-250000)/(200000)]$

$=10\mathrm{.}16$