Direct Computation of Nonoperating Return with Noncontrolling Interest Balance sheets and income statements for Costco Wholesale Corporation follow. Consolidated Statements of Earnings For Fiscal Years Ended (5 millions) September 1, 2013 September 2, 2012 August 28, 2011 Revenue Net Sales $102,870 $97,062 $87,048 Membership fees 2.286 2,075 1,867 Total revenue 105,156 99,137 88,915 Operating expenses Merchandise costs 91,948 86,823 77,739 Selling general andadministrative 10,104 9.518 8691 Preopening expenses 51 37 46 Operating Income 3,053 2,759 2,439 Other income (expense) Interest expense 199) (95) (116) 97 Interest income, and other, net 103 60 Income before income taxes 3,051 2,767 2,383 990 Provision for income taxes 1.000 841 1.767 2,061 Net income including noncontrolling interests 1.542 Net income attributable to noncontrolling interests (22) (58) (80) $ 2,039 $ 1,709 $ 1,462 Net income attributable to Costco September 1, 2013 September 2, 2012 Consolidated Balance Sheets (5 millions, except par value and share data) Assets Current assets Cash and cash equivalents Short-term investments Receivables, net Merchandise inventories Deferred income taxes and other current assets Tatacances $4,644 1,480 1.201 7,894 621 15.0.40 $3.528 1,326 1,026 7,096 550 120 September 1, 2013 September 2, 2012 Consolidated Balance Sheets (5 millions, except par value and share data) Assets Current assets Cash and cash equivalents Short-term investments Receivables, net Merchandise inventories Deferred income taxes and other current assets Total current assets Property and equipment Land Buildings and improvements Equipment and fixtures Construction in progress $4,644 1,480 1,201 7,894 621 15,840 $3.528 1,326 1.026 7,096 550 13,526 4.409 11.556 4,472 585 21,022 (7.141) 13.881 562 4,032 10,879 4.261 374 19,546 (6.585) 12.961 653 $ 30,283 $ 27.140 Less accumulated depreciation and amortization Net property and equipment Other assets Total assets Liabilities and equity Current liabilities Accounts payable Accrued salaries and benefits Accrued member rewards Accrued sales and other taxes Deferred membership fees Other current liabilities Total current liabilities Long-term debt, excluding current portion Deferred income taxes and other liabilities Total liabilities $7,872 2,037 710 382 1.167 $7,303 1,832 661 397 1,101 966 12,260 1.381 1,089 13.257 4,998 1,016 19.271 981 14,622 Equity Preferred stock, $0.005 par value: 100,000,000 shares authorized; no shares issued and outstanding My Subscriptions Return to course Armando Bravo BusinessCourse 13.257 4.998 12.200 1,381 981 14 622 1,016 19271 0 0 Total current liabilities Long-term debt, excluding current portion Deferred income taxes and other liabilities Total liabilities Equity Preferred stock, 50.005 par value: 100.000.000 shares authorized, no shares issued and outstanding Common stock, 10.005 par values 900,000,000 shares authorised 436,839,000 and 432,350,000 shares issued and outstanding Additional paid-in-capital Accumulated other comprehensive loss) income Retained earnings Total Costco stockholders' equity Noncontrolling interests Total equity Total abilities and equity 2 2 4670 (122) 620 10.833 179 11.012 $ 30,283 4369 156 7,834 12,361 157 12.518 $ 27,140 Assume that Costco's return on equity (ROE) for 2013 is 17.58% and its return on net operating assets (RNOA) is 21.78% Assume that the combined federal and state statutory tax rate is 37 a. Compute net nonoperating expense (NNE) and net operating profit after tax (NOPAT). Assume that Equity and other investments are operating. Round to the nearest whole number, if applicable. 2013 NNE - $0 X million 2013 NOPAT = $ 1.923 x million b. Compute net nonoperating obligations (NNO) for 2013 and 2012. 2013 NNO - $ 1,126 x million 2012 NNO = $ 19,103 x million c. Compute financial leverage (FLEV). Round answer to four decimal places 2013 FLEV = 1 X od DD Assume that Costco's return on equity (ROE) for 2013 is 17.58% and its return on net operating assets (RNOA) is 21.7 is 37% a. Compute net nonoperating expense (NNE) and net operating profit after tax (NOPAT). Assume that Equity and oth if applicable 2013 NNE = $ 0 x million 2013 NOPAT = $ 1,923 x million b. Compute net nonoperating obligations (NNO) for 2013 and 2012. 2013 NNO = $ 1,126 x million 2012 NNO = $ 19,103 x million c. Compute financial leverage (FLEV). Round answer to four decimal places. 2013 FLEV = 1 x d. Compute NNEP and Spread, Round answers to two decimal places (example: 0.12345 - 12.35%). 2013 NNEP = 1 X % 2013 Spread = 1 X % e. Compute the noncontrolling interest ratio (NC ratio). Round answer to four decimal places. 2013NCI ratio = X 1 f. Confirm the relation: ROE - [RNOA + (FLEV * Spread)] NCI ratio. 2013 ROE = 1 X%= [ 1 * %+ 1 X X 1 * %)]X 1 Direct Computation of Nonoperating Return with Noncontrolling Interest Balance sheets and income statements for Costco Wholesale Corporation follow. Consolidated Statements of Earnings For Fiscal Years Ended (5 millions) September 1, 2013 September 2, 2012 August 28, 2011 Revenue Net Sales $102,870 $97,062 $87,048 Membership fees 2.286 2,075 1,867 Total revenue 105,156 99,137 88,915 Operating expenses Merchandise costs 91,948 86,823 77,739 Selling general andadministrative 10,104 9.518 8691 Preopening expenses 51 37 46 Operating Income 3,053 2,759 2,439 Other income (expense) Interest expense 199) (95) (116) 97 Interest income, and other, net 103 60 Income before income taxes 3,051 2,767 2,383 990 Provision for income taxes 1.000 841 1.767 2,061 Net income including noncontrolling interests 1.542 Net income attributable to noncontrolling interests (22) (58) (80) $ 2,039 $ 1,709 $ 1,462 Net income attributable to Costco September 1, 2013 September 2, 2012 Consolidated Balance Sheets (5 millions, except par value and share data) Assets Current assets Cash and cash equivalents Short-term investments Receivables, net Merchandise inventories Deferred income taxes and other current assets Tatacances $4,644 1,480 1.201 7,894 621 15.0.40 $3.528 1,326 1,026 7,096 550 120 September 1, 2013 September 2, 2012 Consolidated Balance Sheets (5 millions, except par value and share data) Assets Current assets Cash and cash equivalents Short-term investments Receivables, net Merchandise inventories Deferred income taxes and other current assets Total current assets Property and equipment Land Buildings and improvements Equipment and fixtures Construction in progress $4,644 1,480 1,201 7,894 621 15,840 $3.528 1,326 1.026 7,096 550 13,526 4.409 11.556 4,472 585 21,022 (7.141) 13.881 562 4,032 10,879 4.261 374 19,546 (6.585) 12.961 653 $ 30,283 $ 27.140 Less accumulated depreciation and amortization Net property and equipment Other assets Total assets Liabilities and equity Current liabilities Accounts payable Accrued salaries and benefits Accrued member rewards Accrued sales and other taxes Deferred membership fees Other current liabilities Total current liabilities Long-term debt, excluding current portion Deferred income taxes and other liabilities Total liabilities $7,872 2,037 710 382 1.167 $7,303 1,832 661 397 1,101 966 12,260 1.381 1,089 13.257 4,998 1,016 19.271 981 14,622 Equity Preferred stock, $0.005 par value: 100,000,000 shares authorized; no shares issued and outstanding My Subscriptions Return to course Armando Bravo BusinessCourse 13.257 4.998 12.200 1,381 981 14 622 1,016 19271 0 0 Total current liabilities Long-term debt, excluding current portion Deferred income taxes and other liabilities Total liabilities Equity Preferred stock, 50.005 par value: 100.000.000 shares authorized, no shares issued and outstanding Common stock, 10.005 par values 900,000,000 shares authorised 436,839,000 and 432,350,000 shares issued and outstanding Additional paid-in-capital Accumulated other comprehensive loss) income Retained earnings Total Costco stockholders' equity Noncontrolling interests Total equity Total abilities and equity 2 2 4670 (122) 620 10.833 179 11.012 $ 30,283 4369 156 7,834 12,361 157 12.518 $ 27,140 Assume that Costco's return on equity (ROE) for 2013 is 17.58% and its return on net operating assets (RNOA) is 21.78% Assume that the combined federal and state statutory tax rate is 37 a. Compute net nonoperating expense (NNE) and net operating profit after tax (NOPAT). Assume that Equity and other investments are operating. Round to the nearest whole number, if applicable. 2013 NNE - $0 X million 2013 NOPAT = $ 1.923 x million b. Compute net nonoperating obligations (NNO) for 2013 and 2012. 2013 NNO - $ 1,126 x million 2012 NNO = $ 19,103 x million c. Compute financial leverage (FLEV). Round answer to four decimal places 2013 FLEV = 1 X od DD Assume that Costco's return on equity (ROE) for 2013 is 17.58% and its return on net operating assets (RNOA) is 21.7 is 37% a. Compute net nonoperating expense (NNE) and net operating profit after tax (NOPAT). Assume that Equity and oth if applicable 2013 NNE = $ 0 x million 2013 NOPAT = $ 1,923 x million b. Compute net nonoperating obligations (NNO) for 2013 and 2012. 2013 NNO = $ 1,126 x million 2012 NNO = $ 19,103 x million c. Compute financial leverage (FLEV). Round answer to four decimal places. 2013 FLEV = 1 x d. Compute NNEP and Spread, Round answers to two decimal places (example: 0.12345 - 12.35%). 2013 NNEP = 1 X % 2013 Spread = 1 X % e. Compute the noncontrolling interest ratio (NC ratio). Round answer to four decimal places. 2013NCI ratio = X 1 f. Confirm the relation: ROE - [RNOA + (FLEV * Spread)] NCI ratio. 2013 ROE = 1 X%= [ 1 * %+ 1 X X 1 * %)]X 1