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Below is the formula for Net Operating Profits After Tax (NOPAT). Note that it's just...

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Finance

Below is the formula for Net Operating Profits After Tax (NOPAT). Note that it's just the same as Net Profit After Tax (NPAT) or Net Income (NI), but interest expense (IntExp) is ignored or set to zero.

NPAT = (Rev-COGS-FixedCosts-Depr-IntExp)*(1-tc) = Earnings = NI

NOPAT = (Rev-COGS-FixedCosts-Depr)*(1-tc)

For profit-making firms with leverage, which formula deducts the actual amount of tax that the firm will pay?

Select one:

a.

NPAT.

b.

NOPAT.

c.

Both NPAT and NOPAT deduct the correct amount of tax.

d.

Neither.

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