Note 7 to Starbucks’ 2008 Consolidated Financial Statements presents information about equity method (minority, active) investments.

Required

a. Starbucks’ 2008 net income is $315.5 million, and its interest expense is $53.4 million. Assuming a tax rate of 35 percent and the information presented in the worksheet below the requirements, compute Starbucks’ 2008 ROA.

b. Using the worksheet below and the note information, consolidate the unconsolidated equity method affiliates using a full consolidation approach. Recompute ROA and explain the change in ROA.

c. Using the information from the full consolidation worksheet, describe how you would change your computation of ROA if you followed a proportionate consolidation approach. Recompute ROA under that approach.

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Full Consolidation of Equity Method Affiliates September 28, 2008 Starbucks Affiliates Eliminations Consolidated Current assets Equity and cost investments Remainder of noncurrent assets Total Assets 1,748.0 302.6 3,622.0 5,672.6 Current liabilities Noncurrent liabilities Shareholders' equity $(2,189.7) (992.0) (noncontrolling interest) Shareholders' equity (controlling interest) Total Liabilities and (2,490.9) Shareholders Equity $(5,672.6) September 30, 2007 Current assets Equity and cost investments Remainder of noncurrent assets Total Assets Current liabilities Noncurrent liabilities Shareholders' equity Starbucks Affiliates Eliminations Consolidated 1,696.5 258.9 3,388.5 5,343.9 $(2,155.6) (904.2) (noncontrolling interest) (controlling interest) Shareholders' Equity Shareholders' equity (2,284.1) Total Liabilities and S(5,343.9)