At the time that of its 10-Q filing of financial statements for the first half of its January 2002 fiscal year, Home Depots shares traded at $50 per share. The following are summaries from those financial statements.

Balance Sheet, July 29, 2001 (in millions of dollars)
			Financial liabilities	1,320
Operating assets	23, 457		Operating liabilities	6,709
Financial assets	1,221		Common equity (on 2,336 million outstanding shares)	16,649
	24,678			24,678

Statement of Earnings, Six Months Ended, July 29, 2001 (in millions of dollars)
Net sales		26,776
Cost of Merchandise Sold		18,795
Gross Profit		7,981
Operating Expenses:
Selling and Store Operating		4,963
Pre-Opening		59
General and Administrative		436
Total Operating Expenses		5,458
Operating Income		2,523
Interest Income (Expense):
Interest and Investment Income		22
Interest Expense		(11)
Interest, Net		11
Earnings Before Income Taxes		2,534
Income Taxes		978
Net Earnings		1,556

According to financial statement footnotes, Home Depots statutory tax rate (combined Federal and State rates) is 39%. Other comprehensive income (not in net earnings above) is negligible. Use a required six-month return for operations of 4% in calculations below.

• Calculate the following from these statements:

1. Financial leverage

2. Operating liability leverage

3. After-tax profit margin

• Home Depot earned a return on beginning net operating assets (RNOA) of 9.3% for the six months ending July 29, 2001.

1. What was the asset turnover during these six months?

2. What was the residual operating income over the six months

• Calculate the free cash flow generated by operations during the six months.
• At the current market price of $50 per share, what growth rate for residual operating income does the market forecast for the future?