Balance sheets and income statements for fothemp : Infmsm follow. Refer to these financial statements to answer the requirements.

\section*{Required}

a. Compute net operating profit after tax (NOPAT) for 2007 and 2006. Assume that other income or expense are operating items, and that the combined federal and state statutory tax rates are \(37.1 \%\) for 2007 and \(36.6 \%\) for 2006

b. Compute net operating assets (NOA) for 2007 and 2006.

c. Compute RNOA and disaggregate it into net operating profit margin (NOPM) and net operating asset turnover (NOAT) for 2007 and 2006; the 2005 NOA is \(\$ 41,292\) million. Comment on the drivers of RNOA.

d. Compute net nonoperating obligations (NNO) for 2007 and 2006. Confirm the relation: \(\mathrm{NOA}=\) NNO + Stockholders' equity.

e. Compute return on equity (ROE) for 2007 and 2006 ; the 2005 stockholders' equity is \(\$ 38,710\) million.

f. Infer the nonoperating return component of ROE for both 2007 and 2006.
g. Comment on the difference between ROE and RNOA. What does this relation suggest about JNJ's use of equity capital?

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Years Ended ($ millions) Sales to customers... Costs of products sold.. Gross profit..... JOHNSON & JOHNSON AND SUBSIDIARIES Consolidated Statement of Earnings 2007 2006 2005 $61,095 $53,324 $60,514 17,751 15,057 14,010 43,344 38,267 36,504 Selling, marketing and administrative expenses 20,451 17,433 17,211 Research expense.... 7,680 7,125 6,462 Purchased in-process research and development. 807 559 Restructuring.. 745 - Interest income.. (452) (829) 362 (487) Interest expense, net of portion capitalized. 296 63 54 Other (income) expense, net 534 (671) (214) 30,061 23,680 23,388 Earnings before provision for taxes on income 13,283 14,587 13,116 Provision for taxes on income. 2,707 3,534 3,056 Net earnings... $10,576 $11,053 $10.060