Edwards Electronics recently reported $11,250 of sales, $5,500 of operating costs other than depreciation, and $1,250 of depreciation

Finance Oct 22, 2020

Edwards Electronics recently reported $11,250 of sales, $5,500 of operating costs other than depreciation, and $1,250 of depreciation. The company had no amortization charges, it had $3,500 of bonds that carry a 6.25% interest rate, and its federal-plus-state income tax rate was 25%. How much was its net operating profit after taxes (NOPAT)?

Expert Solution

Computation of Net Operating Profit after Taxes (NOPAT):

Net Operating Profit after Taxes (NOPAT) = Operating Profit *(1-Tax Rate)

Here,

Operating Profit = Sales- Operating Expenses - Depreciation = $11,250-$5,500-$1,250 = $4,500

Tax Rate = 25%

Net Operating Profit after Taxes (NOPAT) = $4,500*(1-25%) = $3,375

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