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?
A) 6.43% and 21.43%
B) 20.7% and 21.43%
C) 2.14% and 32.14%
D) 22.86% and 32.14%

Question

Quizplus · Accepted Answer

Net profit margin is calculated as (Net Income / Sales) * 100. Net Income = Sales - COGS - Depreciation - Interest - Taxes. Taxes = (Sales - COGS - Depreciation - Interest) * Tax Rate. NOPAT margin is calculated as (NOPAT / Sales) * 100, where NOPAT = Operating Income - Taxes on Operating Income.

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