Last year,Lenny's Lemonade had $3,500 in sales,and cost of goods sold was $2,000.Depreciation expenses totaled $500 and interest expense was $700.If the tax rate is 25%,what is the net profit margin for Lenny's Lemonade? What is its NOPAT margin?

Question

Quizplus · Accepted Answer

Net profit margin = (Net Profit / Sales) x 100
= [(Revenue - Cost of goods sold - Depreciation - Interest) x (1- Tax rate) / Sales] x 100
= [(3500 - 2000 - 500 - 700) x (1-0.25) / 3500] x 100
= 6.43%

NOPAT margin = (NOPAT / Sales) x 100
= [EBIT x (1-Tax rate) / Sales] x 100
= [(3500 - 2000 - 500 - 700) x (1-0.25) / 3500] x 100
= 21.43%

Therefore, the best choice is (A) 6.43% and 21.43%.

Last Year,Lenny's Lemonade Had $3,500 in Sales,and Cost of Goods