Reformulation for Multi-Year Capitalization of Operating Leases Use the information provided below for Southwest Airlines to answer the requirements. $ millions Net operating assets (NOA) Net nonoperating obligations (NNO) Total stockholders' equity Net nonoperating expenses (NNE) Net operating profit after tax (NOPAT) Net income 2013 2014 2015 $ 7,559 $ 7,034 $8,040 (332) (296) 127 7,891 7,330 791B 141 140 128 895 1,276 2,809 2,181 754 1,186 Revenue 19,921 20,827 22,042 Below are the adjustments that analysts would use to account for Southwest's operating leases as if they were capitalized. Adjustments are based on the present value of Southwest's operating leases for fiscal years 2013-2015. Balance Sheet Adjustments ($ millions) 2013 2014 2015 Net operating assets (NOA) +3,267 +4,244 +3,188 Net nonoperating obligations (NNO) +3,267 +4,244 +3,188 Equity 0 0 0 Income Statement Adjustments ($ millions) 2013 2014 2015 Interest expense +129 +167 +126 Net nonoperating expense, NNE +81 +105 +79 Net operating profit after tax, NOPAT +81 +105 Net income 0 0 0 +79 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. 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 2014 2015 Unadjusted Adjusted Unadjusted Adjusted Unadjusted Adjusted % % % % ROE % 90 RNOA % % WO 0% % % 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