- Best Buy Co., Inc.

Included in the Case is the Best Buy 2022 Annual Report (see Blackboard). Your analysis for the Case is based on the completion of the sections below. The entire Case must be typed in Word only (10 font, single-spaced) with the charts/tables included in the main body of the reportalong with any attachments. In orderto obtain completeor partial crediton the sections below, you need to show all calculations (not just a final answer).

Where applicable, you should state your assumptions.

1. Analysis of Historical Operating Performance (GAAPBasis)

1. Perform a year-to-year trend analysis by computing the percentage change and dollar change between fiscal 2022 and fiscal 2021 for the following income statement items (use 2 decimal places to the right, i.e., 38.27%). Also, showdollar amounts for the fiscal 2022 and fiscal 2021-line items below.

-Revenues

-Gross Profit

-Operating Income

-EBIT

-Interest Expense

-Net Income

-EBITDA

1. Calculate the following profitability ratios for fiscal 2022 and fiscal 2021 (using2 decimal places):

-Gross Margin

-Operating Margin

-EBIT Margin

-Interest Coverage

-Net Margin

-EBITDA Margin

1. Discuss in detail the change in Best Buy's financial performance

between fiscal 2022 and fiscal 2021 by discussing some of the information derived in part A and B (key variances and margins) and your review of the Management Discussion and Analysis and Footnotes in the annual report. Your discussion should include comments pertaining to changes in operatingperformance of the major businesssegments. Note: The analysis should be comprehensive and must be your own original

thoughts.

1. Financial Position(GAAP Basis) and ROE (DuPont)Analysis

1. 1. CalculateBest Buy's Returnon Equity (ROE) for 2022 and 2021

using the 3-step DuPont model (assume total assets of $15,591 million and shareholders' equity of $3,479 million at 2020 fiscal year-end) Note: Show all formulas and calculations.

1. Discuss whichfactors (profitability, activity,solvency) are primarily driving the change in ROE between fiscal 2022 and 2021

.

1. Comment on Best Buy's liquidity position, as of January 29, 2022.

Use liquidity ratios, available lines of credit, and the Companys access to the capital markets in your discussion.

1. 1. Comment on Best Buy's capital structure as of January29, 2022.

As part of your discussion, compare (calculate) the Companys Total Debt-to-Total Capitalratio and Total Debt/EBITDA ratio for fiscalyear- end 2022 and year-end 2021.

1. Calculate Best Buy's enterprise value at January 29, 2022. Assume the Companys debt is valuedat 95 and its commonstock price per share was

$97.64 (show all work).Discuss the significance of Best Buy's enterprise valueas part of your capital structure analysis.

1. 1. Calculate the average total life span of Best Buy's property, plant and equipment at fiscal year-end 2022 (show work).

1. Calculate Best Buy's average age of property, plant and equipment at fiscal year-end 2022 (show work).

1. Comment on theoutcome (meaning) of theratios calculated above.

1. 3-Year Financial forecast - Management Case

Your supervisor has receivedthe following forecast variables from

Best Buy's management duringa recent bank meeting he attended in Minneapolis:

Forecast Variables 2023, 2024, 2025

-Revenue growth of 3.5%, 2.8%, and 2.4% projected for 2023, 2024, and 2025, respectively

-Gross margin is forecasted to improve 21 basis points each year, using the gross marginin 2022 as the base year;

-Selling, general, and administrative expense, as a percentage of revenues, for each forecast periodwill be based on the 3-yearhistorical average;

-Restructuring charges are expected to be $18.7 million in 2023, $17.5 million in 2024,and $19.2 million in 2025 (all non-cash);

-Interest expense is projected to increase2.3% each forecast period,using interest expensein 2022 as the base year;

-Investment income is forecasted to be $24.0 million in 2023, $25.2 million in 2024, and $20.7 million in 2025;

-Assume taxes on (pre-tax) earnings of 38.0% for all forecast periods;

-Assume no equity income(loss) in the 3-year forecast;

-The Company is projecting capital expenditures of $748.0 millionin 2023,

$756.0 million in 2024, and $762.0 million in 2025. Assumemaintenance capital expenditures for each period is 35% of each of the above totals;

-Depreciation expense is forecasted to increase 2.4% each forecast period, using 2022 as the base year in computations (ignorefor income statement);

-Management will be paying dividends on common stock of 12.0% on net earnings in each forecast period (if earnings are negative, no dividends will be paid);

-Assume scheduled principal debt repayments as follows: 2023 - $14.0 million, 2024 - $14.0 million,and 2025 - $14.0 million;

-Management projectslease rent expenseof $706 million, $644 millionand

$521 million in 2023, 2024, and 2025, respectively. (Note: These amounts are already included in the income statement above; however, use

information for part C.)

1. Using the Companys forecast variables above, prepare a complete Income Statement Forecast for 2023, 2024, and 2025 (show all work).

1. Based on the above, prepare a Statement of Free Cash Flows for 2023, 2024, and 2025.

1. Using the Fixed Charge Coverage ratio formula discussed in class, calculate BestBuy's Fixed ChargeCoverage (ratio) for 2023, 2024, and 2025

(show all work).

1. Comment on the overall trends from Managements 3-Year Income Statement Forecast, the 3-Year Free Cash Flow Forecast and the 3-Year Fixed Charge Coverage Forecast you prepared above.

Consolidated Statements of Earnings $ and shares in millions, except per share amounts Consolidated Statements of Comprehensive Income $ in millions See Notes to Consolidated Financial Statements. Consolidated Statements of Changes in Shareholders' Equity $ and shares in millions, except per share amounts Consolidated Statements of Cash Flows $ in millions Consolidated Statements of Changes in Shareholders' Equity $ and shares in millions, except per share amounts Consolidated Statements of Earnings $ and shares in millions, except per share amounts Consolidated Statements of Comprehensive Income $ in millions See Notes to Consolidated Financial Statements. Consolidated Statements of Changes in Shareholders' Equity $ and shares in millions, except per share amounts Consolidated Statements of Cash Flows $ in millions Consolidated Statements of Changes in Shareholders' Equity $ and shares in millions, except per share amounts