Question 5 Not complete Marked out of 10.00 P Flag question Reformulation for Multi-Year Capitalization of Operating Leases Use the information provided below for Southwest Airlines to answer the requirements. 2013 2014 2015 Net operating assets INOA $ 7,559 $ 7,034 $8,040 Net nonoperating obligations (NNO) (332) (296) 127 Total stockholders equity 7.891 7,330 7.913 Net nonoperating expenses (NNE) 141 140 128 Net operating profit after tax (NOPAT) 895 1,276 2.309 Net income 754 1.136 2,181 Revervue 19,921 20,827 22,042 Below are the adjustments that analysts would use to account for Southwest's operating leases as if they were capitalized. Adjustments are based on the present value of Southwest's operating leases for fiscal years 2013-2015. Balance Sheet Adjustments (5 millions) 2013 2014 2015 Net operating assets (NOA) +3,267 4,244 3188 Net nonoperating obligations INNO) Equity Income Statement Adjustments (5 millions) 2013 2014 2015 Interest expense +129 -167 +126 Net nonoperating expense. NNE +81 +10579 Net operating profit after tax, NOPAT +81 -105 79 0 0 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 ROERNOA, and NOPM to one decimal place (ex 0.2345 = 23.5%) Round NOAT and FLEV to two decimal places. Use negative signs with answers, when appropriate. 2:17 PM Type here to search VO 5 6 4 7 8 2 3 Net operating profit after tax, NOPAT Net income +81 +105 0 0 +79 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. Use negative signs with answers, when appropriate. 2013 2015 Adjusted 0 % 2014 Unadjusted Adjusted 0 % Unadjusted Adjusted O Unadjusted ROE RNOA NOPM NOAT FLEV 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. Check