Analysis and Interpretation of Ratios When RNOA Exceeds ROE

Refer to the balance sheets and income statement below for Facebook Inc.

FACEBOOK INC.
Consolidated Statement of Income
For Year Ended December 31, $ millions	2018
Revenue	$55,838
Costs and expenses
Cost of revenue	13,213
Research and development	10,273
Marketing and sales	7,846
General and administrative	3,451
Total costs and expenses	34,783
Income from operations	21,055
Interest and other income (expense), net	448
Income before provision for income taxes	21,503
Provision for income taxes	3,249
Net income	$18,254

FACEBOOK INC.
Consolidated Balance Sheet
At December 31, $ millions	2018	2017
Current assets
Cash and cash equivalents	$10,019	$11,937
Marketable securities	34,953	33,632
Accounts receivable, net	11,445	9,690
Prepaid expenses and other current assets	1,779	1,020
Total current assets	58,196	56,279
Property and equipment, net	24,683	17,579
Intangible assets, net	1,294	5,742
Goodwill	22,159	18,221
Other assets	2,576	2,135
Total assets	$108,908	$99,956
Current liabilities
Accounts payable	$820	$380
Partners payable	4,399	4,248
Accrued expenses and other current liabilities	5,509	6,750
Deferred revenue and deposits	147	98
Total current liabilities	10,875	11,476
Other liabilities	10,048	6,417
Total liabilities	20,923	17,893
Stockholders' equity
Common stock and additional paid-in capital	46,764	48,300
Accumulated other comprehensive loss	(760)	(227)
Retained earnings	41,981	33,990
Total stockholders' equity	87,985	82,063
Total liabilities and stockholders' equity	$108,908	$99,956
Combined federal and state statutory tax rate	22%

a. Compute net operating profit after tax (NOPAT) for 2018. Assume that the combined federal and state statutory tax rate is 22%. Hint: Carefully consider whether nonoperating expense is positive or negative.

	NOPAT
	Answer