Question

Zucker Inc. recently reported $13 million in earnings before interest and taxes (EBIT). Its federal-plus-state tax rate is 25%. What is its net operating profit after taxes? Enter your answer in dollars. For example, an answer of $1.2 million should be entered as 1,200,000. Round your answer to the nearest dollar.

Answer 1

Zucker Inc.'s net operating profit after taxes (NOPAT) is calculated by subtracting the tax amount, which is 25% of the EBIT of $13 million, from the EBIT itself. The NOPAT works out to be $9,750,000 after rounding to the nearest dollar.

Step-by-step explanation:

To calculate Zucker Inc.'s net operating profit after taxes (NOPAT), we begin with its earnings before interest and taxes (EBIT) of $13 million. Applying the federal-plus-state tax rate of 25%, we first calculate the tax amount, which is 25% of $13 million, resulting in $3.25 million ($13,000,000 * 0.25). To find the NOPAT, we then subtract this tax amount from the EBIT.

The calculation is as follows:

• EBIT: $13,000,000
• Tax amount: $3,250,000
• NOPAT: $13,000,000 - $3,250,000 = $9,750,000

Therefore, the net operating profit after taxes for Zucker Inc. would be $9,750,000, rounded to the nearest dollar.