Janzen Corporation had total capitalization of $890 million.It had sales of $900; cost of goods sold of $595 million, and operating expenses of $95 million.Tax rate is 40%.Calculate the company's Return of Capital.

Question

Quizplus · Accepted Answer

Return on Capital is calculated as Net Operating Profit After Tax (NOPAT) divided by Total Capitalization. NOPAT is calculated as (Sales - Cost of Goods Sold - Operating Expenses) * (1 - Tax Rate). Here, NOPAT = ($900M - $595M - $95M) * (1 - 0.40) = $126M. Return on Capital = $126M / $890M = 14%.

Janzen Corporation Had Total Capitalization of $890 Million