The following are summaries from financial statements for the warehouse retailer, Nike Inc. for fiscal year ending January 29, 2014: Summary Reformulated Balance Sheet, January 29, 2014 (in millions of dollars) Financial assets Operating assets 2014 757 43,725 2013 456 38,564 Financial liabilities Operating liabilities Common equity 2014 4,085 13,488 26,909 2013 2,159 12,703 24,158 44,482 39,020 44,482 39,020 Summary Reformulated Income Statement, Year Ended, January 29, 2014 (in millions of dollars) Sales Core operating expenses Core operating income Taxes allocated to core operating income Core operating income, after tax Unsustainable operating income, after tax Operating income, after tax 81,511 72,148 9,363 3,474 5,889 182 6,071 Where relevant, make all calculations for 2014 with beginning-of-period balance sheet numbers in the questions below. (a) Nike estimates that it pays an implicit after-tax borrowing cost on its operating liabilities of 2% after tax. Calculate the rate of return it would have earned from its operations had it not used this supplier financing. (b) The firm has a net borrowing cost of 3.0% after tax. Calculate the ROCE for 2014. (c) Complete the income statement to report the after-tax net financial expenses for 2014 and comprehensive income. (d) In an article in the Financial Times, a hedge fund manager argued that Nike should borrow $17 billion to repurchase its stock. Suppose that core operating profitability and the net borrowing cost were forecasted to be the same for 2005 as in 2014. What ROCE would you forecast for 2005 under the following conditions: 1. Nike did not made the stock repurchase 2. Nike made the stock repurchase on January 29, 2014