Analysis and Interpretation of Profitability Balance sheets and income statements for Target Corporation follow.

Sales	$ 61,471	$ 57,878	$ 51,271
Credit card revenues	1,896	1,612	1,349
Total revenues	63,367	59,490	52,620
Cost of sales	41,895	39,399	34,927
Selling, general and administrative expenses	13,704	12,819	11,185
Credit card expenses	837	707	776
Depreciation and amortization	1,659	1,496	1,409
Earnings before interest and income taxes	5,272	5,069	4,323
Net interest expense	647	572	463
Earnings before income taxes	4,625	4,497	3,860
Provisions for income taxes	1,776	1,710	1,452
Net earnings	$ 2,849	$ 2,787	$ 2,408

Assets
Cash and cash equivalents	$ 2,450	$ 813
Credit card receivables	8,054	6,194
Inventory	6,780	6,254
Other current assets	1,622	1,445
Total current assets	18,906	14,706
Property and equipment
Land	5,522	4,934
Buildings and improvements	18,329	16,110
Fixtures and equipment	3,858	3,553
Computer hardware and software	2,421	2,188
Construction-in-progress	1,852	1,596
Accumulated depreciation	(7,887)	(6,950)
Property and equipment, net	24,095	21,431
Other noncurrent assets	1,559	1,212
Total assets	$ 44,560	$ 37,349
Liabilities and shareholders' investment
Accounts payable	$ 6,721	$ 6,575
Accrued and other current liabilities	3,097	3,180
Current portion of long-term debt and notes payable	1,964	1,362
Total current liabilities	11,782	11,117
Long-term debt	15,126	8,675
Deferred income taxes	470	577
Other noncurrent liabilities	1,875	1,347
Shareholders' investment
Common stock	68	72
Additional paid-in-capital	2,656	2,387
Retained earnings	12,761	13,417
Accumulated other comprehensive income (loss)	(178)	(243)
Total shareholders' investment	15,307	15,633
Total liabilities and shareholders' equity	$ 44,560	$ 37,349

(a) Compute net operating profit after tax (NOPAT) for 2008. Assume that the combined federal and statutory rate is: 39%. (Round your answer to the nearest whole number.)

2008 NOPAT =Answer($ millions) (b) Compute net operating assets (NOA) for 2008 and 2007.

2008 NOA =Answer($ millions) 2007 NOA =Answer($ millions)

(c) Compute Target's RNOA, net operating profit margin (NOPM) and net operating asset turnover (NOAT) for 2008. (Do not round until final answer. Round two decimal places. Do not use NOPM x NOAT to calculate RNOA.)

2008 RNOA =Answer% 2008 NOPM =Answer% 2008 NOAT =Answer

(d) Compute net nonoperating obligations (NNO) for 2008 and 2007.

2008 NNO =Answer($ millions) 2007 NNO =Answer($ millions) (e) Compute return on equity (ROE) for 2008. (Round your answers to two decimal places. Do not round until your final answer.)

2008 ROE =Answer% (f) Infer the nonoperating return component of ROE for 2008. (Use answers from above to calculate. Round your answer to two decimal places.)

2008 nonoperating return =Answer% (g) Which of the following statements reflects the best inference we can draw from the difference between Target's ROE and RNOA?

ROE > RNOA implies that Target's equity has grown faster than its NOA.ROE > RNOA implies that Target has taken on too much financial leverage.ROE > RNOA implies that Target is able to borrow money to fund operating assets that yield a return greater than its cost of debt; the excess accrues to the benefit of Target's stockholders.ROE > RNOA implies that Target has increased its financial leverage during the period. Analysis and Interpretation of Profitability Balance sheets and income statements for Target Corporation follow. Income Statement For Fiscal Years Ended ($ millions) Sales 2008 2007 $ 61,471 2006 $ $ 51,271 57,878 1,896 1,612 1,349 Total revenues 63,367 59,490 52,620 Cost of sales 41,895 39,399 34,927 Selling, general and administrative expenses 13,704 12,819 11,185 837 707 776 1,659 1,496 1,409 5,272 5,069 4,323 647 572 463 4,625 4,497 3,860 1,776 1,710 1,452 $ 2,849 $ 2,787 $ 2,408 Credit card revenues Credit card expenses Depreciation and amortization Earnings before interest and income taxes Net interest expense Earnings before income taxes Provisions for income taxes Net earnings Balance Sheet ($ millions, except footnotes) February 2, 2008 February 3, 2007 Assets Cash and cash equivalents $ 2,450 $ 813 Credit card receivables 8,054 6,194 Inventory 6,780 6,254 1,622 1,445 18,906 14,706 5,522 4,934 18,329 16,110 Fixtures and equipment 3,858 3,553 Computer hardware and software 2,421 2,188 Construction-in-progress 1,852 1,596 (7,887) (6,950) Other current assets Total current assets Property and equipment Land Buildings and improvements Accumulated depreciation Balance Sheet ($ millions, except footnotes) Property and equipment, net February 2, 2008 February 3, 2007 24,095 21,431 1,559 1,212 $ 44,560 $ 37,349 $ 6,721 $ 6,575 Accrued and other current liabilities 3,097 3,180 Current portion of long-term debt and notes payable 1,964 1,362 Total current liabilities 11,782 11,117 Long-term debt 15,126 8,675 470 577 1,875 1,347 68 72 2,656 2,387 12,761 13,417 (178) (243) 15,307 15,633 $ 44,560 $ 37,349 Other noncurrent assets Total assets Liabilities and shareholders' investment Accounts payable Deferred income taxes Other noncurrent liabilities Shareholders' investment Common stock Additional paid-in-capital Retained earnings Accumulated other comprehensive income (loss) Total shareholders' investment Total liabilities and shareholders' equity (a) Compute net operating profit after tax (NOPAT) for 2008. Assume that the combined federal and statutory rate is: 39%. (Round your answer to the nearest whole number.) 2008 NOPAT = Answer ($ millions) (b) Compute net operating assets (NOA) for 2008 and 2007. 2008 NOA = Answer ($ millions) 2007 NOA = Answer ($ millions) (c) Compute Target's RNOA, net operating profit margin (NOPM) and net operating asset turnover (NOAT) for 2008. (Do not round until final answer. Round two decimal places. Do not use NOPM x NOAT to calculate RNOA.) 2008 RNOA = Answer % 2008 NOPM = Answer % 2008 NOAT = Answer (d) Compute net nonoperating obligations (NNO) for 2008 and 2007. 2008 NNO = Answer 2007 NNO = Answer ($ millions) ($ millions) (e) Compute return on equity (ROE) for 2008. (Round your answers to two decimal places. Do not round until your final answer.) 2008 ROE = Answer % (f) Infer the nonoperating return component of ROE for 2008. (Use answers from above to calculate. Round your answer to two decimal places.) 2008 nonoperating return = Answer % (g) Which of the following statements reflects the best inference we can draw from the difference between Target's ROE and RNOA? ROE > RNOA implies that Target's equity has grown faster than its NOA. ROE > RNOA implies that Target has taken on too much financial leverage. ROE > RNOA implies that Target is able to borrow money to fund operating assets that yield a return greater than its cost of debt; the excess accrues to the benefit of Target's stockholders. ROE > RNOA implies that Target has increased its financial leverage during the period