Compute net nonoperating obligations (NNO) for 2016 and 2015. Compute return on equity (ROE) for 2016. (Do not round until final answer. Round answer two decimal places) Infer the nonoperating return component of ROE for 2016. (Use answers from above to calculate. Round two decimal places.)What does the relation between ROE and RNOA suggest about Costco's use of equity capital?

$110,22 2.046 Analysis and Interpretation of Profitability Balance sheets and income statements for Costco Wholesale Corporation follow. Costco Wholesale Corporation Consolidated Statements of Earnings For Fiscal Years Ended ($ millions) August 28, 2016 August 30, 2015 August 31, 2014 Revenue Net Sales $116,073 $113,665 Membership fees Total revenue 118,719 116,199 112,640 Operating expenses Merchandise costs 102,901 101,065 Selling, general and administrative 11,445 Preopening expenses Operating Income 3,672 3,220 Other income (expense) Interest expense Interest income and other net Income before income taxes 3,604 3,197 Provision for income taxes 1.195 1.109 Net income including noncontrolling interests 2,409 2,088 Net income attributable to noncontrolling interests (32) (30) Net income attributable to Costco $2.350 $223777 $2058 12068 6 3,624 2220 1,350 123 1,618 8,908 76,779 228 $35077 Costco Wholesale Corporation Consolidated Balance Sheets ($ millions, except par value and share data) August 28, 2016 August 30, 2015 Assets Current assets Cash and cash equivalents $3,379 $4,801 Short-term investments Receivables, net Merchandise inventories Deferred income taxes and other current assets 268 Total current assets 15,218 Property and equipment Land 5,395 4,961 Buildings and improvements 13.994 12,618 Equipment and fixtures 6,077 5,274 Construction in progress 701 811 Gross property and equipment 26,167 23,664 Less accumulated depreciation and amortization 19.124) (8,263) Net property and equipment 17,0451 15,401 Other assets 902 Total assets $35165 Liabilities and equity Current liabilities Accounts payable $7,612 Current portion long-term debt $1,100 Accrued salaries and benefits Accrued member rewards 869 Deferred membership fees Other current liabilities Total current liabilities Long-term debt, excluding current portion Other liabilities 1.195 Total liabilities 20831 Equity Preferred stock. $0.005 par value: 100,000,000 shares authorized; no shares issued and outstanding Common stock, $0.005 par value: 900,000,000 shares authorized: 437,524,000 and 437,952,000 shares issued and outstanding Additional paid-in-capital 5,490 Accumulated other comprehensive loss (1,099) Retained earnings 74686 Total Costco stockholders' equity 12,079 10,617 Noncontrolling interests 2531 226 Total equity 11223572 10,843 Total liabilities and equity $33163 333,017 NANO (d) Compute net nonoperating obligations (NNO) for 2016 and 2015 2016 NNO = ($ millions) 2015 NNO = ($ millions) (e) Compute return on equity (ROE) for 2016. (Do not round until final answer. Round answer two decimal places) 2016 ROE = (f) Infer the nonoperating return component of ROE for 2016. (Use answers from above to calculate. Round two decimal places.) (g) What does the relation between ROE and RNOA suggest about Costco's use of equity capital? ROE > RNOA implies that Costco's equity has grown faster than its NOA. ROE > RNOA implies that Costco has taken on too much financial leverage. ROE > RNOA implies that Costco is able to borrow money to fund operating assets that yield a return greater than its cost of debt. ROE > RNOA implies that Costco increased its financial leverage during the period. $110,22 2.046 Analysis and Interpretation of Profitability Balance sheets and income statements for Costco Wholesale Corporation follow. Costco Wholesale Corporation Consolidated Statements of Earnings For Fiscal Years Ended ($ millions) August 28, 2016 August 30, 2015 August 31, 2014 Revenue Net Sales $116,073 $113,665 Membership fees Total revenue 118,719 116,199 112,640 Operating expenses Merchandise costs 102,901 101,065 Selling, general and administrative 11,445 Preopening expenses Operating Income 3,672 3,220 Other income (expense) Interest expense Interest income and other net Income before income taxes 3,604 3,197 Provision for income taxes 1.195 1.109 Net income including noncontrolling interests 2,409 2,088 Net income attributable to noncontrolling interests (32) (30) Net income attributable to Costco $2.350 $223777 $2058 12068 6 3,624 2220 1,350 123 1,618 8,908 76,779 228 $35077 Costco Wholesale Corporation Consolidated Balance Sheets ($ millions, except par value and share data) August 28, 2016 August 30, 2015 Assets Current assets Cash and cash equivalents $3,379 $4,801 Short-term investments Receivables, net Merchandise inventories Deferred income taxes and other current assets 268 Total current assets 15,218 Property and equipment Land 5,395 4,961 Buildings and improvements 13.994 12,618 Equipment and fixtures 6,077 5,274 Construction in progress 701 811 Gross property and equipment 26,167 23,664 Less accumulated depreciation and amortization 19.124) (8,263) Net property and equipment 17,0451 15,401 Other assets 902 Total assets $35165 Liabilities and equity Current liabilities Accounts payable $7,612 Current portion long-term debt $1,100 Accrued salaries and benefits Accrued member rewards 869 Deferred membership fees Other current liabilities Total current liabilities Long-term debt, excluding current portion Other liabilities 1.195 Total liabilities 20831 Equity Preferred stock. $0.005 par value: 100,000,000 shares authorized; no shares issued and outstanding Common stock, $0.005 par value: 900,000,000 shares authorized: 437,524,000 and 437,952,000 shares issued and outstanding Additional paid-in-capital 5,490 Accumulated other comprehensive loss (1,099) Retained earnings 74686 Total Costco stockholders' equity 12,079 10,617 Noncontrolling interests 2531 226 Total equity 11223572 10,843 Total liabilities and equity $33163 333,017 NANO (d) Compute net nonoperating obligations (NNO) for 2016 and 2015 2016 NNO = ($ millions) 2015 NNO = ($ millions) (e) Compute return on equity (ROE) for 2016. (Do not round until final answer. Round answer two decimal places) 2016 ROE = (f) Infer the nonoperating return component of ROE for 2016. (Use answers from above to calculate. Round two decimal places.) (g) What does the relation between ROE and RNOA suggest about Costco's use of equity capital? ROE > RNOA implies that Costco's equity has grown faster than its NOA. ROE > RNOA implies that Costco has taken on too much financial leverage. ROE > RNOA implies that Costco is able to borrow money to fund operating assets that yield a return greater than its cost of debt. ROE > RNOA implies that Costco increased its financial leverage during the period