Finance - Return on Invested Capital (ROIC)
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Tibbs Inc. has the following information for the current year: Net income = $300;
Net operating profit after taxes (NOPAT) = $400; Total assets = $2,900; Short-term investments = $200;
Stockholders equity = $1,800; Debt = $700; and Total net operating capital = $2,300.
What is the Return on invested capital (ROIC) for the current year?
a. 13.0%
b. 13.8%
c. 16.0%
d. 17.4%
e. 22.2%
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Solution Summary
This solution sorts through the extra information given in the problem statement to find the key data that is pertinent to the calculation of ROIC. Some of the information in the problem is redundant allowing the student an extra check on their work.
Solution Preview
Return on Invested Capital is calculated as (Net Operating Income After Taxes)/(Invested Capital). The problem statement provides the numerator, NOPAT. (Do not be tempted to use Net Income. Net income includes Non-Operating Income, usually interest and income from ...
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