Balance sheets and income statements for Costco Wholesale Corporation follow.

Costco Wholesale Corporation

Consolidated Statements of Earnings

For Fiscal Years Ended $($$ millions$)$ September $2,2018$

Total revenue $$141,576$

Operating expenses

Merchandise costs $123,152$

Selling, general and administrative $13,876$

Preopening expenses $68$

Operating Income $4,480$

Other $($income$)$ expense

Interest expense $159$

Interest income and other, net $(121)$

Income before income taxes $4,442$

Provision for income taxes $1,263$

Net income including noncontrolling interests $3,179$

Net income attributable to noncontrolling interests $(45)$

Net income attributable to Costco $$3,134$

Costco Wholesale Corporation

Consolidated Balance Sheets

$($$ millions, except par value and share data$)$ September $2,2018$ September $3,2017$

Current assets

Cash and cash equivalents $$6,055$ $$4,546$

Short$-$term investments $1,2041,233$

Receivables, net $1,6691,432$

Merchandise inventories $11,0409,834$

Other current assets $321272$

Total current assets $20,28917,317$

Net property and equipment $19,68118,161$

Other assets $860869$

Total assets $$40,830$ $$36,347$

Current liabilities

Accounts payable $$11,237$ $$9,608$

Accrued salaries and benefits $2,9942,703$

Accrued member rewards $1,057961$

Deferred membership fees $1,6241,498$

Other current liabilities $3,0142,725$

Total current liabilities $19,92617,495$

Long$-$term debt $6,4876,573$

Other liabilities $1,3141,200$

Total liabilities $27,72725,268$

Equity

Preferred stock, $$0\mathrm{.}01$ par value: $00$

Common stock, $$0\mathrm{.}01$ par value: $44$

Additional paid$-$in$-$capital $6,1075,800$

Accumulated other comprehensive loss $(1,199)(1,014)$

Retained earnings $7,8875,988$

Total Costco stockholders$$ equity $12,79910,778$

Noncontrolling interests $304301$

Total equity $13,10311,079$

Total liabilities and equity $$40,830$ $$36,347$

Combined federal and state statutory tax rate $22\mathrm{.}00\%$

ROE $26\mathrm{.}59\%$

RNOA $26\mathrm{.}51\%$

a$.$ Compute net nonoperating expense $($NNE$)$ and net operating profit after tax $($NOPAT$).$

NNE

Answer $1$

$38$

NOPAT

Answer $2$

$3,494$

b$.$ Compute net nonoperating obligations $($NNO$)$ for $2018$ and $2017.$

Year NNO

$2018$ Answer $3$

$794$

$2017$ Answer $4$

$(772)$

c$.$ Compute financial leverage $($FLEV$).$

Numerator Denominator FLEV

Answer $5$

Average net nonoperating obligations $($NNO$)$

Answer $6$

Average equity

Answer $7$

$40,830$

Answer $8$

$6,487$

$6$

d$.$ Compute NNEP and Spread.

Numerator Denominator NNEP

Answer $9$

Net nonoperating expense $($NNE$)$

Answer $10$

Average net nonoperating obligations $($NNO$)$

Answer $11$

$360\mathrm{.}4$

Answer $12$

$993$

$36\mathrm{.}29$

RNOA $($given$)$ NNEP Spread

Answer $13$

$26\mathrm{.}52$

Answer $14$

$36\mathrm{.}29$

$(9\mathrm{.}77)$

e$.$ Compute the noncontrolling interest ratio $($NCI ratio$).`$

Numerator Denominator NCI ratio

Answer $15$

$3,134$

Answer $16$

$0\mathrm{.}2659$

$11,786\mathrm{.}39$

f$.$ Confirm the relation: ROE $=[$RNOA $+($FLEV $\backslash$times Spread$)]\backslash$times NCI ratio.

Ratio Number

ROE $($given$)$ Answer $17$

$26\mathrm{.}59$

RNOA $($given$)$ Answer $18$

$26\mathrm{.}51$

FLEV Answer $19$

$6\mathrm{.}29$

Spread Answer $20$

$9\mathrm{.}77$

NCI ratio Answer $21$

$36\mathrm{.}29$

ROE

$3,192\mathrm{.}19$

$***$ROE may be different due to rounding