Balance sheets and income statements for Best Buy Co , Inc follow Revenue $ 50,272 $ 49,694 $ 45,015 Cost of goods sold 37,611 37,534 34,017 Restructuring charges cost of goods sold 24 Gross Profit 12,637 12,160 10,998 Selling, general and administrative expenses 10,325 9,873 8,984 Restructuring charges 198 52 78 Goodwill and tradename impairment 66 Operating income 2,114 2,235 1,870 Other income (expense) Investment income and other 51 54 35 Investment impairment (111) Interest expense (87) (94) (94) Earnings before income tax expense and equity in income of affiliates 2,078 2,195 1,700 Income tax expense 714 802 674 Equity in income of affiliates 2 1 7 Net earnings including noncontrolling interest 1,366 1,394 1,033 Net income attributable to noncontrolling interest (89) (77) (30) Net income attributable to Best Buy Co , Inc $ 1,277 $ 1,317 $ 1,003 Assets Current assets Cash and cash equivalents $ 1,103 $ 1,826 Short term investments 22 90 Receivables 2,348 2,020 Merchandise inventories 5,897 5,486 Other current assets 1,103 1,144 Total current assets 10,473 10,566 Property and equipment Land and buildings 766 757 Leasehold improvements 2,318 2,154 Fixtures and equipment 4,701 4,447 Property under capital lease 120 95 7,905 7,453 Less Accumulated depreciation 4,082 3,383 Property and equipment, net 3,823 4,070 Goodwill 2,454 2,452 Tradenames, net 133 159 Customer relationships, net 203 279 Equity and other investments 328 324 Other noncurrent assets 435 452 Total assets $ 17,849 $ 18,302 Liabilities and equity Current liabilities Accounts payable $ 4,894 $ 5,276 Unredeemed gift card liabilities 474 463 Accrued compensation and related expenses 570 544 Accrued liabilities 1,471 1,681 Accrued income taxes 256 316 Short term debt 557 663 Current portion of long term debt 441 35 Total current liabilities 8,663 8,978 Long term liabilities 1,183 1,256 Long term debt 711 1,104 Equity Best Buy Co , Inc Shareholders' equity Preferred stock, $1 00 par value Common stock, $0 10 par value 39 42 Additional paid in capital 18 441 Retained earnings 6,372 5,797 Accumulated other comprehensive income (loss) 173 40 Total Best Buy Co , Inc shareholders' equity 6,602 6,320 Noncontrolling interest 690 644 Total equity 7,292 6,964 Total liabilities and equity $ 17,849 $ 18,302 (a) Compute the following for Best Buy Co Hint RNOA is 18 86 and NOPAT is $1,389 Rounding instructions Do not round until your final answer Round FLEV and NCI ratio four decimal places Round Spread and NNEP two decimal places Remember to use negative signs in answers when appropriate Fill in the blanks 2011 NNO (Net non operating obligations) ($ millions) 2010 NNO (Net non operating obligations) ($ millions) 2011 NNE (Net non operating expense) ($ millions) 2011 NNEP (Net nonoperating expense percent) 2011 FLEV 2011 Spread 2011 NCI ratio (b) Assume that Best Buy Co 's return on equity (ROE) for 2011 is 19 76 and its return on net operating assets (RNOA) is 18 86 Confirm computations to yield the relation ROE RNOA (FLEV X Spread) X NCI ratio Fill in the blanks 2011 ROE ( X ) X (c) What do your computations of the non operating return in parts (a) and (b) imply about the company's use of borrowed funds (multiple choice) a) Best Buy is able to borrow funds and invest the proceeds in operating assets yielding a return in excess of the cost of its debt which results in a benefit to stockholders b) Best Buy is able to borrow funds, however, is unable to invest the proceeds in operating assets to yield a return in excess of the cost of its debt which results in a loss for stockholders c) Best Buy is heavily debt financed and unable to earn a sufficient return with the proceeds to cover the cost of its debt, which results in a loss to stockholders or d) Best Buy is able to borrow fund and invest the proceeds in operating assets yielding a return in excess of the cost of its debt However, it results in a loss to its stockholders

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Balance sheets and income statements for Best Buy Co., Inc. follow Revenue $ 50,272 $ 49,694 $ 45,015 Cost of goods sold 37,611 37,534 34,017

Balance sheets and income statements for Best Buy Co., Inc. follow

Revenue	$ 50,272	$ 49,694	$ 45,015
Cost of goods sold	37,611	37,534	34,017
Restructuring charges - cost of goods sold	24	--	--
Gross Profit	12,637	12,160	10,998
Selling, general and administrative expenses	10,325	9,873	8,984
Restructuring charges	198	52	78
Goodwill and tradename impairment	--	--	66
Operating income	2,114	2,235	1,870
Other income (expense)
Investment income and other	51	54	35
Investment impairment	--	--	(111)
Interest expense	(87)	(94)	(94)
Earnings before income tax expense and equity in income of affiliates	2,078	2,195	1,700
Income tax expense	714	802	674
Equity in income of affiliates	2	1	7
Net earnings including noncontrolling interest	1,366	1,394	1,033
Net income attributable to noncontrolling interest	(89)	(77)	(30)
Net income attributable to Best Buy Co., Inc.	$ 1,277	$ 1,317	$ 1,003

Assets
Current assets
Cash and cash equivalents	$ 1,103	$ 1,826
Short-term investments	22	90
Receivables	2,348	2,020
Merchandise inventories	5,897	5,486
Other current assets	1,103	1,144
Total current assets	10,473	10,566
Property and equipment
Land and buildings	766	757
Leasehold improvements	2,318	2,154
Fixtures and equipment	4,701	4,447
Property under capital lease	120	95
	7,905	7,453
Less: Accumulated depreciation	4,082	3,383
Property and equipment, net	3,823	4,070
Goodwill	2,454	2,452
Tradenames, net	133	159
Customer relationships, net	203	279
Equity and other investments	328	324
Other noncurrent assets	435	452
Total assets	$ 17,849	$ 18,302
Liabilities and equity
Current liabilities
Accounts payable	$ 4,894	$ 5,276
Unredeemed gift card liabilities	474	463
Accrued compensation and related expenses	570	544
Accrued liabilities	1,471	1,681
Accrued income taxes	256	316
Short-term debt	557	663
Current portion of long-term debt	441	35
Total current liabilities	8,663	8,978
Long-term liabilities	1,183	1,256
Long-term debt	711	1,104
Equity
Best Buy Co., Inc. Shareholders' equity
Preferred stock, $1.00 par value	--	--
Common stock, $0.10 par value	39	42
Additional paid-in capital	18	441
Retained earnings	6,372	5,797
Accumulated other comprehensive income (loss)	173	40
Total Best Buy Co., Inc. shareholders' equity	6,602	6,320
Noncontrolling interest	690	644
Total equity	7,292	6,964
Total liabilities and equity	$ 17,849	$ 18,302

(a) Compute the following for Best Buy Co.. Hint: RNOA is 18.86% and NOPAT is $1,389. Rounding instructions: Do not round until your final answer. Round FLEV and NCI ratio four decimal places. Round Spread and NNEP two decimal places. Remember to use negative signs in answers when appropriate. Fill in the blanks: 2011 NNO (Net non-operating obligations) =__________($ millions) 2010 NNO (Net non-operating obligations) =__________($ millions) 2011 NNE (Net non-operating expense) =__________($ millions) 2011 NNEP (Net nonoperating expense percent) =__________% 2011 FLEV =__________ 2011 Spread =__________% 2011 NCI ratio =__________

(b) Assume that Best Buy Co.'s return on equity (ROE) for 2011 is 19.76% and its return on net operating assets (RNOA) is 18.86%. Confirm computations to yield the relation: ROE = [RNOA + (FLEV X Spread)] X NCI ratio. Fill in the blanks: 2011 ROE =__________% = [__________%+(__________ X __________%)] X __________

(c) What do your computations of the non-operating return in parts (a) and (b) imply about the company's use of borrowed funds: (multiple choice) a).Best Buy is able to borrow funds and invest the proceeds in operating assets yielding a return in excess of the cost of its debt which results in a benefit to stockholders; b).Best Buy is able to borrow funds, however, is unable to invest the proceeds in operating assets to yield a return in excess of the cost of its debt which results in a loss for stockholders; c).Best Buy is heavily debt financed and unable to earn a sufficient return with the proceeds to cover the cost of its debt, which results in a loss to stockholders; or d).Best Buy is able to borrow fund and invest the proceeds in operating assets yielding a return in excess of the cost of its debt. However, it results in a loss to its stockholders.