PLEASE SOLVE FOR RED MARKS

Reformulation for Multi-Year Capitalization of Operating Leases

a. Compute the following ratios using the unadjusted and the adjusted numbers for each year. For simplicity only, use year-end balances for NOA, NNO, and equity.

• Round ROE, RNOA, and NOPM to one decimal place (ex: 0.2345 = 23.5%).

• Round NOAT and FLEV to two decimal places.

Reformulation for Multi-Year Capitalization of Operating Leases Use the information provided below for Lowe's to answer the requirements. $ millions $ 2019 2018 2017 Net operating assets (NOA) $18,882 $21,770 $21,109 Net nonoperating obligations (NNO) 15,238 15,897 14,675 Total stockholders' equity 3,644 5,873 6,434 Net nonoperating expenses (NNE) 487 494 503 Net operating profit after tax (NOPAT) 2,801 3,941 3,596 Net income 2,314 3,447 3,093 Revenue 71,309 68,619 65,017 Below are the adjustments that analysts would use to account for Lowe's operating leases as if they were capitalized. Adjustments are based on the present value of Lowe's operating leases for fiscal years 2017-2019. Balance Sheet Adjustments ($ millions) 2019 2018 2017 Net operating assets (NOA) +4,356 +4,693 +4,658 Net nonoperating obligations (NNO) +4,356 +4,693 +4,658 Equity 0 0 0 Income Statement Adjustments ($ millions) 2019 2018 2017 Interest expense +174 +188 +186 Net nonoperating expense, NNE +136 +146 +145 Net operating profit after tax, NOPAT +136 +146 +145 Net income 0 a. Compute the following ratios using the unadjusted and the adjusted numbers for each year. For simplicity only, use year-end balances for NOA, NNO, and equity. Round ROE, RNOA, and NOPM to one decimal place (ex: 0.2345 = 23.5%). Round NOAT and FLEV to two decimal places. ROE RNOA 2019 Unadjusted 63.5 % 12.26 % x 3.93 % x Adjusted 0% X 0% x 2018 Unadjusted Adjusted 58.69 % X 0% x 0X 15.83% X D4S X 5.74% X 0% X 2017 Unadjusted 49.07% x 14.65% X 5.53 % x Adjusted 0% x 0% X 0% x OX NOPM NOAT FLEV 0% X OX 0 X 3.78 4.18 3.15 3.08 2.28 2.71 OX 0 X b. Does the lease capitalization make a large difference in any of these ratios? OLease capitalization makes a large difference in both the RNOA and FLEV ratios. OLease capitalization makes a large difference in both the ROE and RNOA ratios. OLease capitalization makes a large difference in both the RNOA and NOPM ratios. OLease capitalization makes a large difference in both the ROE and FLEV ratios