Balance sheets and income statements for $3$M Company follow.

$3$M COMPANY

Consolidated Statements of Income

For Years ended December $31($$ millions$)20182017$

Net sales $$32,765$ $$31,657$

Operating expenses

Cost of sales $16,68216,055$

Selling, general and administrative expenses $7,6026,626$

Research, development and related expenses $1,8211,870$

Gain on sale of businesses $(547)(586)$

Total operating expenses $25,55823,965$

Operating income $7,2077,692$

Other expense, net$*207144$

Income before income taxes $7,0007,548$

Provision for income taxes $1,6372,679$

Net income including noncontrolling interest $5,3634,869$

Less: Net income attributable to noncontrolling interest $1411$

Net income attributable to $3$M $$5,349$ $$4,858$

$*$Interest expense, gross $$350$ $$322$

$3$M COMPANY

Consolidated Balance Sheets

At December $31($$ millions, except per share amount$)20182017$

Current Assets

Cash and cash equivalents $$2,853$ $$3,053$

Marketable securities $3801,076$

Accounts receivable $5,0204,911$

Total inventories $4,3664,034$

Prepaids $741937$

Other current assets $349266$

Total current assets $13,70914,277$

Property, plant and equipment$-$net $8,7388,866$

Goodwill $10,05110,513$

Intangible assets$-$net $2,6572,936$

Other assets $1,3451,395$

Total assets $$36,500$ $$37,987$

Current liabilities

Short$-$term borrowings and current portion of long$-$term debt $$1,211$ $$1,853$

Accounts payable $2,2661,945$

Accrued payroll $749870$

Accrued income taxes $243310$

Other current liabilities $2,7752,709$

Total current liabilities $7,2447,687$

Long$-$term debt $13,41112,096$

Pension and postretirement benefits $2,9873,620$

Other liabilities $3,0102,962$

Total liabilities $26,65226,365$

$3$M Company shareholders' equity

Common stock, par value $99$

Additional paid$-$in capital $5,6435,352$

Retained earnings $40,63639,115$

Treasury stock $(29,626)(25,887)$

Accumulated other comprehensive income $($loss$)(6,866)(7,026)$

Total $3$M Company shareholders' equity $9,79611,563$

Noncontrolling interest $5259$

Total equity $9,84811,622$

Total liabilities and equity $$36,500$ $$37,987$

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 $22\%.$

NOPAT

b$.$ Compute net operating assets $($NOA$)$ for $2018$ and $2017.$

Year NOA

$2018$

$2017$

c$.$ Compute and disaggregate $3$M$$s RNOA into net operating profit margin $($NOPM$)$ and net operating asset turnover $($NOAT$)$ for $2018.$ Demonstrate that RNOA $=$ NOPM $\backslash$times NOAT.

Numerator Denominator RNOA

Numerator Denominator NOPM

Numerator Denominator NOAT

Ratio Number

NOPM

NOAT

RNOA

$***$RNOA may be different from first RNOA calculation due to rounding

d$.$ Compute net nonoperating obligations $($NNO$)$ for $2018$ and $2017.$ Confirm the relation: NOA $=$ NNO $+$ Total equity

Year NNO

$2018$

$2017$

Year NNO Total equity NOA

$2018$

$2017$

e$.$ Compute return on equity $($ROE$)$ for $2018.$

Numerator Denominator ROE

f$.$ What is the nonoperating return component of ROE for $2018?$

ROE RNOA Nonoperating component of ROE