Winton Company has three divisions.The Florida Division has a 30 percent tax rate, a 4.5 percent cost of capital, and a 7.5 percent required rate of return.During the fiscal year, the division reported sales of $3,920,000.Interest expense was $120,000 and net income was $122,800.The Florida Division has total assets of $2,950,000 and noninterest-bearing liabilities of $150,000.How much is the Florida Division's NOPAT?
A)$242,800
B)$158,800
C)$206,800
D)None of these answer choices are correct.

Question

Quizplus · Accepted Answer

First, we need to calculate the operating income (OI):
OI = Net Income + Interest Expense x (1 - Tax Rate)
OI = $122,800 + $120,000 x (1 - 0.30)
OI = $122,800 + $84,000
OI = $206,800

Next, we can calculate the NOPAT using the following formula:
NOPAT = OI x (1 - Tax Rate)
NOPAT = $206,800 x (1 - 0.30)
NOPAT = $206,800 x 0.70
NOPAT = $144,760

Therefore, the Florida Division's NOPAT is $206,800.

Winton Company Has Three Divisions