1. Nucor is the largest steel producer in the United States. Please consider the excerpts from Nucors annual report for fiscal year 2014 presented in the next page and answer the following questions.

1. What inventory cost flow assumption(s) does Nucor use to determine the cost of inventories? [2 points]

2. Suppose Nucor had used FIFO as a cost flow assumption for all its inventories. Assume a tax rate of 35%. Would net income for December 31^st, 2014 be higher, lower or the same as currently reported? If you answer higher or lower, please indicate by how much. [3 points]

3. Did Nucor save taxes cumulatively over the years since inception (up to December 31^st, 2014) by using LIFO instead of FIFO as a cost flow assumption? If so, by how much? If not, why? [3 points]

4. What is Nucors gross profit margin (=(sales-cost of sales)/sales) as reported? What would Nucor gross-profit margin be if the company had used FIFO as a cost flow assumption for all its inventories? Which of the two numbers you calculated is more informative? [3 points]

5. Note 6 states that Use of lower of cost or market reduced inventories by $2.7 million at December 31, 2014. What does this mean? What are the financial statement implications of this event? [3 points]

Excerpts from Nucors Financial Statement (Contd.)

2013 CONSOLIDATED STATEMENTS OF EARNINGS Cin thousands, except per share data) Year Ended December 31 2014 2012 NET SALES $21,105,141 $19,052,046 $19,429,273 COSTS, EXPENSES AND OTHER: Cost of products sold (Notes 6, 14 and 18) 19,198,615 17,641,421 17,915,735 Marketing, administrative and other expenses (Notes 3 and 7) 546,198 481,904 454.900 Equity in (eamings) losses of unconsolidated affiliates (Note 10) (13,505) 19,297) 13,323 Impairment of non-current assets (Note 10) 30,000 Interest expense, net (Notes 7, 19 and 20) 169,256 146,895 162,375 19,900.564 18,260.923 18,576,333 EARNINGS BEFORE INCOME TAXES AND NONCONTROLLING INTERESTS 1,204,577 791,123 852,940 PROVISION FOR INCOME TAXES (Note 20) 388,787 205,594 259,814 NET EARNINGS 815,790 585,529 593,126 EARNINGS ATTRIBUTABLE TO NONCONTROLLING INTERESTS 101,844 97,504 88,507 NET EARNINGS ATTRIBUTABLE TO NUCOR STOCKHOLDERS $ 713.946 $ 488,025 $ 504,619 NET EARNINGS PER SHARE (Note 22): Basic $2.22 $1.52 $1.58 Diluted $1.58 See notes to consolidated financial statements Inventories Valuation Inventories are stated at the lower of cost or market. Inventories valued using the last-in, first-out (LIFO) method of accounting represent approximately 43% of total inventories as of December 31, 2014 (45% as of December 31, 2013). Al inventories held by the parent company and Nucor-Yamato Steel Company are valued using the LIFO method of accounting except for supplies that are consumed indirectly in the production process, which are valued using the first-in, first-out (FIFO) method of accounting Al inventories held by other subsidiaries of the parent company are valued using the FIFO method of accounting. The Company records any amount required to reduce the carrying value of inventory to net realizable value as a charge to cost of products sold. $2.22 $1.52 | 6. INVENTORIES Inventories consist of approximately 40% raw materials and supplies and 60% finished and semi-finished products at December 31, 2014, and December 31, 2013. Nucor's manufacturing process consists of a continuous, vertically integrated process from which products are sold to customers at various stages throughout the process. Since most steel products can be classified as either finished or semi-finished products, these two categories of inventory are combined. If the FIFO method of accounting had been used, inventories would have been $567.4 million higher at December 31, 2014 ($624.7 million higher at December 31, 2013). Use of the lower of cost or market method reduced inventories by $2.7 million at December 31, 2014 ($2.1 million at December 31, 2013). in thousands 2013 2014 $ 1,024,144 100,000 2,068,298 2,745,032 504.414 6,441,888 5,287,639 2,068,664 862,093 955,643 $15.615.927 $ 1,483,252 28.191 1,810,987 2,605,609 482,007 6,410,046 4,917,024 1.973,608 874,154 1,028,451 $15,203,283 December 31, ASSETS CURRENT ASSETS: Cash and cash equivalents (Note 15) Short-term investments (Notes 4 and 15) Accounts receivable, net (Note 5) Inventories, net (Note 6) Other current assets (Notes 10, 14 and 20) Total current assets PROPERTY, PLANT AND EQUIPMENT, NET (Note 7) GOODWILL (Note 9 OTHER INTANGIBLE ASSETS, NET (Note 9) OTHER ASSETS (Note 10) TOTAL ASSETS LIABILITIES AND EQUITY CURRENT LIABILITIES: Short-term debt (Notes 12 and 15) Long-term debt due within one year (Notes 12 and 15) Accounts payable (Note 11) Salaries, wages and related accruals (Note 18) Accrued expenses and other current liabilities (Notes 11, 14, 16 and 20) Total current liabilities LONG-TERM DEBT DUE AFTER ONE YEAR (Notes 12 and 15) DEFERRED CREDITS AND OTHER LIABILITIES (Notes 14, 16, 18 and 20) TOTAL LIABILITIES COMMITMENTS AND CONTINGENCIES (Notes 14 and 16) EQUITY NUCOR STOCKHOLDERS' EQUITY (Notes 13 and 17): Common stock (800,000 shares authorized; 378,092 and 377,525 shares issued, respectively) Additional paid-in capital Retained earnings Accumulated other comprehensive (loss) income, net of income taxes (Notes 2, 14 and 211 Treasury stock (59,059 and 59,197 shares, respectively) Total Nucor stockholders' equity NONCONTROLLING INTERESTS TOTAL EQUITY TOTAL LIABILITIES AND EQUITY $ 207,476 16,335 993,872 352,488 527,605 2,097,776 4,360,600 1.082,433 7,540,809 $ 29,202 3,300 1,117,078 282,860 527.776 1,960,216 4,376.900 955.889 7.293,005 151,237 1,883,356 7,378,214 151,010 1,843,353 7,140,440 (145,708) (1,494,629 7.772,470 302.648 8,075,118 $15,615,927 9,080 (1,498,114) 7,645,769 264,509 7.910.278 $15,203,283 See more to colated financial statements