Selected income statement information for 2018 is presented below for Home Depot Inc. and Lowe's Companies Inc. Assume the statutory tax rate is 22%.
| Company ($ millions) | Sales | NOPBT | Pretax net non-operating expense | Tax expense | Average net operating assets |
|-----------------------|-------|-------|----------------------------------|------------|------------------------------|
| Home Depot (HD) | 108,203 | 15,530 | 974 | 3,435 | 25,217 |
| Lowe's (LOW) | 71,309 | 4,018 | 624 | 1,080 | 20,326 |
Required:
a. Compute the following measures for both companies.
| | HD | LOW |
|--------------|--------|--------|
| Tax on operating profit | | |
| NOPAT | | |
| RNOA | | |
| NOPM | | |
| NOAT | | |
b. Indicate which of these two companies:
| | HD | LOW |
|--------------|--------|--------|
| Is more profitable (in $s) | | |
| Produces the higher profit margin (in %) | | |
| Uses its NOA more efficiently | | |
| Produces the higher return on NOA | | |