Direct Computation of Nonoperating Return with Noncontrolling Interest 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

2018-NOPAT

all of question D and E

and the last two blanks of F

Direct Computation of Nonoperating Return with Noncontrolling Interest 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 Net income attributable to Costco $3,134 (45) Costco Wholesale Corporation Consolidated Balance Sheets ($ 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 1,204 1,233 Receivables, net 1,669 1,432 Merchandise inventories 11,040 9,834 Other current assets 321 272 Total current assets 20,289 17,317 Net property and equipment 19,681 18,161 Other assets 860 869 Total assets $40,830 $36,347 Current liabilities Accounts payable $11,237 $9,608 Accrued salaries and benefits 2.994 2,703 Accrued member rewards 1,057 961 Deferred membership fees 1,624 1,498 Other current liabilities 3,014 2,725 Total current liabilities 19,926 17,495 Long-term debt 6,487 6,573 Other liabilities 1,314 1,200 Total liabilities 27,727 25,268 Equity Preferred stock, $0.01 par value: 0 0 Common stock, $0.01 par value: 4 Additional paid-in-capital 6,107 5,800 Accumulated other comprehensive loss (1.199) (1.014) Retained earnings 7,887 5.988 Total Costco stockholders' equity 12.799 10,778 4 No controlling interest 334 301 Toalequity 13.103 11079 Totabilities and equity 540,830 536347 In 2018, Costco's return on equity (ROE) is 26.59 and its return an net operating assets ( AOA) is 2652 Assume that the combined federal and state statutory tax rate is 22% a. Compute net nonoperating expense INNE and net operating profit after tax INOPAT), Round to the nearest whole number of applicable 2018 NNES 30 milion 2018 NOPAT S 3.547 x million b. Compute net nonoperating obligations (NNO) for 2018 and 2017 2018 NNOS (7721 milion 2017 NNO S 794 million compute financial leverage (AEV), Round answer to four decimal places 2018 IV 0.0009 c. compute NNEP and Spread Round answers to two decimal places (example. 0.12345 12354) 2018 NNEP 4668 X 2018 Spread 73.2 X 2. Compute the noncontrolling interest ratio in ratio) Round answer to four decimal places 2018 NC Ratio 10494 x Confirm the relation ROERNOA+IFLEV Spread NC ratio 2018 ROE 26.59 26.52 0.0009 X 23.83 XX 1.0004 duty 540,830 536.347 In 2018, Costco's return on equity (ROE) IS 26.59% and its return on net operating assets (RNOA) IS 26.52%. Assume that the combined federal and state statutory tax rate is 22% a. Compute net nonoperating expense (NNE) and net operating profit after tax (NOPAT), Round to the nearest whole number, il applicable 2018 NNE $ 30 million 2018 NOPAT $ 3,547 x million b. Compute net nonoperating obligations (NNO) for 2018 and 2017 2018 NNOS (772) million 2017 NNO $ 794 million c. Compute financial leverage (FLEV). Round answer to four decimal places 2018 FLEV 0.0009 d. Compute NNEP and Spread. Round answers to two decimal places (example: 012345 - 12.39%). 2018 NNEP 46.68 X% 2018 Spread 732 X% e Compute the noncontrolling interest ratio (NCI ratio). Round answer to four decimal places. 2018 NC Ratio 1.0404 x X 23.83 X 5 X 1,0404 f. Confirm the relation: ROE (RNOA + (FLEV Spread)) NC ratio. 2018 ROE 26.59 % [ 26.52 0.0009