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

Consolidated Statements of Earnings
For Fiscal Years Ended ($ millions)	February 27, 2010	February 28, 2009	March 1, 2008
Revenue	$ 49,694	$ 45,015	$ 40,023
Cost of goods sold	37,534	34,017	30,477
Restructuring charges - cost of goods sold	--	--	--
Gross Profit	12,160	10,998	9,546
Selling, general and administrative expenses	9,873	8,984	7,385
Restructuring charges	52	78	--
Goodwill and tradename impairment	--	66	--
Operating income	2,235	1,870	2,161
Other income (expense)
Investment income and other	54	35	129
Investment impairment	--	(111)	--
Interest expense	(94)	(94)	(62)
Earnings before income tax expense and equity in income of affiliates	2,195	1,700	2,228
Income tax expense	802	674	815
Equity in income of affiliates	1	7	(3)
Net earnings including noncontrolling interest	1,394	1,033	1,410
Net income attributable to noncontrolling interest	(77)	(30)	(3)
Net income attributable to Best Buy Co., Inc.	$ 1,317	$ 1,003	$ 1,407

Consolidated Balance Sheets
($ millions, except footnotes)	February 27, 2010	February 28, 2009
Assets
Current assets
Cash and cash equivalents	$ 1,826	$ 498
Short-term investments	90	11
Receivables	2,020	1,868
Merchandise inventories	5,486	4,753
Other current assets	1,144	1,062
Total current assets	10,566	8,192
Property and equipment
Land and buildings	757	755
Leasehold improvements	2,154	2,013
Fixtures and equipment	4,447	4,060
Property under capital lease	95	112
	7,453	6,940
Less: Accumulated depreciation	3,383	2,766
Property and equipment, net	4,070	4,174
Goodwill	2,452	2,203
Tradenames, net	159	173
Customer relationships, net	279	322
Equity and other investments	324	395
Other noncurrent assets	452	367
Total assets	$ 18,302	$ 15,826
Liabilities and equity
Current liabilities
Accounts payable	$ 5,276	$ 4,997
Unredeemed gift card liabilities	463	479
Accrued compensation and related expenses	544	459
Accrued liabilities	1,681	1,382
Accrued income taxes	316	281
Short-term debt	663	783
Current portion of long-term debt	35	54
Total current liabilities	8,978	8,435
Long-term liabilities	1,256	1,109
Long-term debt	1,104	1,126
Equity
Best Buy Co., Inc. Shareholders' equity
Preferred stock, $1.00 par value	--	--
Common stock, $0.10 par value	42	41
Additional paid-in capital	441	205
Retained earnings	5,797	4,714
Accumulated other comprehensive income (loss)	40	(317)
Total Best Buy Co., Inc. shareholders' equity	6,320	4,643
Noncontrolling interest	644	513
Total equity	6,964	5,156
Total liabilities and equity	$ 18,302	$ 15,826

Questions (a) Compute the following for Best Buy Co.

Hint: RNOA is 21.08% and NOPAT is $1,419. Assume that Equity and other investments are operating.

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. 2010 NNO = 2009 NNO = 2010 NNE = 2010 NNEP = 2010 FLEV = 2010 Spread = 2010 NCI ratio = (b) Assume that Best Buy Co's return on equity (ROE) for 2010 is 24.03% and its return on net operating assets (RNOA) is 21.08%. Confirm computations to yield the relation: ROE = [RNOA + (FLEV X Spread)] X NCI ratio. 2010 ROE = (c) What do your computations of the nonoperating return in parts (a) and (b) imply about the company's use of borrowed funds

- 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.

- 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.

- 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.

- 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.