Please show calculations!

Analysis and Interpretation of Profitability Balance sheets and income statements for 3M Company follow. Consolidated Statements of Income Years ended December 31 (5 millions) 2006 2005 2004 Net sales $22.923 $ 21,167 $ 20,011 Operating expenses Cost of sales 11,713 10,408 10,002 Selling, general and administrative expenses 5,066 4,631 4,437 Research, development and related expenses 1,522 1,274 1,246 Loss/(gain) from sale of business (1,074) Total operating expenses 17,227 16,313 15,685 Operating income 5,696 4,854 4,326 Interest expenses and income Interest expense 82 Interest income (51) (56) (46) Total interest expense 71 26 23 Income before income taxes 5,625 4,828 4,303 Provision for income taxes 1,723 1,627 1,400 Net income including noncontrolling interest 3.902 3.201 2.903 Less: Net income attributable to noncontrolling interest 51 55 62 Net income 53,851 $3,146 $2,841 122 69 2006 2005 $ 1,072 $1,447 471 3,102 2,838 Consolidated Balance Sheets ($ millions) Assets Current Assets Cash and cash equivalents Marketable securities-current Accounts receivable-net Inventories Finished goods Work in process Raw materials and supplies Total inventories Other current assets Total current assets Marketable securities-noncurrent Investments Property, plant and equipment Less: Accumulated depreciation Property, plant and equipment-net Goodwill Intangible assets-net Prepaid pension benefits Other assets Total assets 1,235 795 571 2,601 1,325 8,946 1,050 706 406 2,162 1,043 7,115 166 314 272 17,017 16,127 (11,110) (10,534) 5,907 5,593 4,082 3,530 708 486 395 2,905 776 $ 21,294 $ 20,541 640 $ 2,506 1,402 520 1,134 1,761 7,323 1,047 $1,072 1,256 469 989 1,452 5,238 1,309 Liabilities Current liabilities Short-term borrowings and current portion of long-term debt Accounts payable Accrued payroll Accrued income taxes Other current liabilities Total current liabilities Long-term debt Pension and postretirement benefits Other liabilities Total liabilities Equity 3M Company shareholders' equity: Common stock, par value $.01 per share; Additional paid-in capital Retained earnings Treasury stock Accumulated other comprehensive income (loss) Total 3M Company shareholders' equity Noncontrolling interest Total equity Total liabilities and equity 2,965 11,335 3,599 10,146 2,484 17,933 (8,456) (2,011) 9,959 2,225 15,715 (6,965) (589) 10,395 9,959 10,395 $ 21,294 $ 20,541 (a) Compute net operating profit after tax (NOPAT) for 2006. Assume that the combined federal and statutory rate is: 36.0% (Round your answer to the nearest whole number.) 2006 NOPAT = 3,645 $ millions) (b) Compute net operating assets (NOA) for 2006 and 2005. Treat noncurrent Investments as a nonoperating item. 2006 NOA = 11,751 ($ millions) 2005 NOA = 11,162 ($ millions) (c) Compute 3M's RNOA, net operating profit margin (NOPM) and net operating asset turnover (NOAT) for 2006. (Round your answers to two decimal places. Do not round until your final answer. Do not use NOPM x NOAT to calculate RNOA.) 2006 RNOA = 20.87 % % 2006 NOPM = 15.9 2006 NOAT = 1.31 (d) Compute net nonoperating obligations (NNO) for 2006 and 2005. 2006 NNO = 0 ($ millions) 2005 NNO = O ($ millions) (e) Compute return on equity (ROE) for 2006. (Round your answers to two decimal places. Do not round until your final answer.) 2006 ROE = 0 % (f) What is the nonoperating return component of ROE for 2006? (Round your answers to two decimal places.) Hint: Use your prior rounded answers to compute this answer. 2006 nonoperating return = 0 % (g) Which of the following statements reflects the best inference we can draw from the difference between 3M's ROE and RNOA? OROE > RNOA implies that 3M has taken on too much financial leverage. OROE > RNOA implies that 3M is able to borrow money to fund operating assets that yield a return greater than its cost of debt. OROE > RNOA implies that 3M's equity has grown faster than its NOA. OROE > RNOA implies that 3M has increased its financial leverage during the period. Analysis and Interpretation of Profitability Balance sheets and income statements for 3M Company follow. Consolidated Statements of Income Years ended December 31 (5 millions) 2006 2005 2004 Net sales $22.923 $ 21,167 $ 20,011 Operating expenses Cost of sales 11,713 10,408 10,002 Selling, general and administrative expenses 5,066 4,631 4,437 Research, development and related expenses 1,522 1,274 1,246 Loss/(gain) from sale of business (1,074) Total operating expenses 17,227 16,313 15,685 Operating income 5,696 4,854 4,326 Interest expenses and income Interest expense 82 Interest income (51) (56) (46) Total interest expense 71 26 23 Income before income taxes 5,625 4,828 4,303 Provision for income taxes 1,723 1,627 1,400 Net income including noncontrolling interest 3.902 3.201 2.903 Less: Net income attributable to noncontrolling interest 51 55 62 Net income 53,851 $3,146 $2,841 122 69 2006 2005 $ 1,072 $1,447 471 3,102 2,838 Consolidated Balance Sheets ($ millions) Assets Current Assets Cash and cash equivalents Marketable securities-current Accounts receivable-net Inventories Finished goods Work in process Raw materials and supplies Total inventories Other current assets Total current assets Marketable securities-noncurrent Investments Property, plant and equipment Less: Accumulated depreciation Property, plant and equipment-net Goodwill Intangible assets-net Prepaid pension benefits Other assets Total assets 1,235 795 571 2,601 1,325 8,946 1,050 706 406 2,162 1,043 7,115 166 314 272 17,017 16,127 (11,110) (10,534) 5,907 5,593 4,082 3,530 708 486 395 2,905 776 $ 21,294 $ 20,541 640 $ 2,506 1,402 520 1,134 1,761 7,323 1,047 $1,072 1,256 469 989 1,452 5,238 1,309 Liabilities Current liabilities Short-term borrowings and current portion of long-term debt Accounts payable Accrued payroll Accrued income taxes Other current liabilities Total current liabilities Long-term debt Pension and postretirement benefits Other liabilities Total liabilities Equity 3M Company shareholders' equity: Common stock, par value $.01 per share; Additional paid-in capital Retained earnings Treasury stock Accumulated other comprehensive income (loss) Total 3M Company shareholders' equity Noncontrolling interest Total equity Total liabilities and equity 2,965 11,335 3,599 10,146 2,484 17,933 (8,456) (2,011) 9,959 2,225 15,715 (6,965) (589) 10,395 9,959 10,395 $ 21,294 $ 20,541 (a) Compute net operating profit after tax (NOPAT) for 2006. Assume that the combined federal and statutory rate is: 36.0% (Round your answer to the nearest whole number.) 2006 NOPAT = 3,645 $ millions) (b) Compute net operating assets (NOA) for 2006 and 2005. Treat noncurrent Investments as a nonoperating item. 2006 NOA = 11,751 ($ millions) 2005 NOA = 11,162 ($ millions) (c) Compute 3M's RNOA, net operating profit margin (NOPM) and net operating asset turnover (NOAT) for 2006. (Round your answers to two decimal places. Do not round until your final answer. Do not use NOPM x NOAT to calculate RNOA.) 2006 RNOA = 20.87 % % 2006 NOPM = 15.9 2006 NOAT = 1.31 (d) Compute net nonoperating obligations (NNO) for 2006 and 2005. 2006 NNO = 0 ($ millions) 2005 NNO = O ($ millions) (e) Compute return on equity (ROE) for 2006. (Round your answers to two decimal places. Do not round until your final answer.) 2006 ROE = 0 % (f) What is the nonoperating return component of ROE for 2006? (Round your answers to two decimal places.) Hint: Use your prior rounded answers to compute this answer. 2006 nonoperating return = 0 % (g) Which of the following statements reflects the best inference we can draw from the difference between 3M's ROE and RNOA? OROE > RNOA implies that 3M has taken on too much financial leverage. OROE > RNOA implies that 3M is able to borrow money to fund operating assets that yield a return greater than its cost of debt. OROE > RNOA implies that 3M's equity has grown faster than its NOA. OROE > RNOA implies that 3M has increased its financial leverage during the period