The following are summaries from financial statements for the warehouse retailer, Home Depot Inc. for fiscal year ending January 29, 2006:

Summary Reformulated Balance Sheet, January 29, 2006

(in millions of dollars)

	2006	2005			2006	2005
Financial assets	757	456		Financial liabilities	4,085	2,159
Operating assets	43,725	38,564		Operating liabilities	13,488	12,703
				Common equity	26,909	24,158
	44,482	39,020			44,482	39,020

Summary Reformulated Income Statement, Year Ended, January 29, 2006 (in millions of dollars)
Sales Core operating expenses Core operating income Taxes allocated to core operating income		81,511 72,148 9,363 3,474
Core operating income, after tax		5,889
Unsustainable operating income, after tax		182
Operating income, after tax		6,071

Where relevant, make all calculations for 2006 with beginning-of-period balance sheet numbers in the questions below.

(a)Calculate the following from these statements:

1.Financial leverage at the end of fiscal year, 2005

2.Operating liability leverage at the end of fiscal year, 2005

(b)Home Depot 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.

(c)Calculate the return on net operating assets (RNOA) for the 2006. Also calculate the core return on net operating assets for the year.

(d)Show that Core RNOA = Core Profit Margin Asset Turnover

(e)The firm has a net borrowing cost of 3.0% after tax. Calculate the return on common equity (ROCE) for 2006.

(f)Complete the income statement to report the after-tax net financial expenses for 2006 and comprehensive income.