Value line publishing October 2002 Case Study and analysis. I have attached the case and the questions that I need help with.

. Case Report 2 Case 10: Value Line Publishing: October 2002 For the case report, first summarize the case in a paragraph. Second, answer the case questions in your case report. Each of the answers should be at least a few sentences long. Make sure to reference the case in your answers when necessary. Some of the questions do not have correct answers but rather ask for your opinion on a topic. Make sure to provide sufficient evidence as to why you answer a certain way. Submit your case report to the blackboard case report section when complete. Part 1: Case Report Summary A. Summary Part 2: Case Report Questions B. Galeotafiore expected that future growth would come from what sources? Which source do you think is the most and least plausible? C. Some analysts had a positive and other analysts had a negative outlook for Home Depot. What are the assumptions that lead to these suppositions? D. Who deserves the \"Management of the Year\" award in the retail building-supply industry? Refer to the Performance Comparison table below. E. Compare and contrast the Financial Ratios for Home Depot and Lowes. Which company is in a stronger position based on ratio analysis? Refer to the Ratio Analysis for Lowe's Table below. F. Compare and contrast the Financial Forecast for Home Depot and Lowes. Which company is in a stronger position based on the Financial Forecast? Refer to the Financial Forecast for Lowe's Table below. VALUE LINE PUBLISHING, VALUE LINE PUBLISHING, OCTOBER 2002 Performance Comparison: Home Depot versus Lowe's, 2001 Home Depot Lowe's VALUE LINE PUBLISHING, Working capital (CANIBCLs) Fixed assets Total capital Tax rate NOPAT (EBIT*(1t)) 3,865 16,033 19,898 38.6% 3,028 2,063 8,816 10,879 37.0% 1,133 Profitability Return on capital (NOPAT/total capital) Return on equity (net earnings/s. equity) 15.2% 16.8% 10.4% 15.3% Margins Gross margin (gross profit/sales) Cash operating expenses/sales Depreciation/sales Depreciation/P&E Operating margin (EBIT/sales) NOPAT margin (NOPAT/sales) 31.6% 20.9% 1.4% 5.0% 9.2% 5.7% 28.8% 18.3% 2.4% 6.2% 8.1% 5.1% Turnover Total capital turnover (sales/total capital) P&E turnover (sales/P&E) Working-capital turnover (sales/WC) Receivable turnover (sales/AR) Inventory turnover (COGS/m. inventory) Sales per store ($ millions) Sales per sq. foot ($) Sales per transaction ($) 2.7 3.5 13.9 58.2 5.4 40.2 366.8 49.1 2.0 2.6 10.7 133.5 4.4 29.7 274 56.0 Growth Total sales growth Sales growth for existing stores Growth in new stores Growth in sq. footage per store 17.1% -0.4% 17.5% 1.0% 17.7% 2.9% 14.5% 4.0% 1.10 1.63 Leverage Total capital/equity VALUE LINE PUBLISHING, OCTOBER 2002 Ratio Analysis for Lowe's 1997 Working capital (CANIBCLs) Fixed assets Total capital Tax rate NOPAT (EBIT*(1t)) Fiscal Year 1998 1999 2000 2001 772 3,110 3,881 36.0% 399 1,012 3,759 4,771 36.4% 530 1,460 5,319 6,779 36.6% 743 1,539 7,201 8,739 36.8% 886 2,063 8,816 10,879 37.0% 1,133 Profitability Return on capital (NOPAT/total capital) Return on equity (net earnings/s. equity) 10.3% 13.7% 11.1% 15.4% 11.0% 14.3% 10.1% 14.7% 10.4% 15.3% Margins Gross margin (gross profit/sales) Cash operating expenses/sales Depreciation/sales Depreciation/P&E Operating margin (EBIT/sales) NOPAT margin (NOPAT/sales) 26.5% 18.0% 2.4% 8.0% 6.2% 3.9% 26.9% 17.9% 2.2% 7.5% 6.8% 4.3% 27.5% 18.0% 2.1% 6.5% 7.4% 4.7% 28.2% 18.5% 2.2% 5.8% 7.5% 4.7% 28.8% 18.3% 2.4% 6.2% 8.1% 5.1% 2.6 3.4 13.1 85.6 4.3 21.3 254 43.9 2.6 3.4 12.1 85.1 4.3 23.5 256 45.7 2.3 3.1 10.9 107.5 4.1 27.6 279 53.2 2.1 2.7 12.2 116.6 4.1 28.9 277 54.9 2.0 2.6 10.7 133.5 4.4 29.7 274 56.0 20.8% 10.8% 9.0% 10.0% 29.9% 17.3% 10.8% 7.6% 18.1% 4.6% 12.8% 5.4% 17.7% 2.9% 14.5% 4.0% 1.52 1.44 1.59 1.63 Turnover Total capital turnover (sales/total capital) P&E turnover (sales/P&E) Working-capital turnover (sales/WC) Receivable turnover (sales/AR) Inventory turnover (COGS/m. inventory) Sales per store ($ millions) Sales per sq. foot ($) Sales per transaction ($) Growth Total sales growth Sales growth for existing stores Growth in new stores Growth in sq. footage per store Leverage Total capital/equity 1.49 VALUE LINE PUBLISHING, OCTOBER 2002 Financial Forecast for Lowe's 2001 2002E Fiscal Year 2003E 2004E 2005E 2006E Growth in new stores Sales growth for existing stores Total sales growth 14.5% 2.9% 17.7% 16.9% 3.0% 19.9% 15.9% 2.6% 18.5% 13.8% 3.9% 17.7% 13.0% 4.9% 17.9% 13.0% 6.4% 19.4% Gross margin Cash operating expenses/sales Depreciation/sales Income-tax rate 28.8% 18.3% 2.4% 37.0% 29.2% 17.7% 2.4% 37.4% 29.5% 18.0% 2.4% 37.5% 29.5% 18.0% 2.4% 37.5% 29.5% 17.7% 2.4% 37.5% 29.5% 17.5% 2.4% 37.5% Cash & ST inv./sales Receivable turnover Inventory turnover P&E turnover Payables/COGS Other curr. liab./sales 3.9% 133.5 4.4 2.6 10.9% 4.2% 3.9% 133.5 4.4 2.6 10.9% 4.2% 4.1% 133.5 4.4 2.8 10.9% 4.2% 4.1% 133.5 4.2 3.0 10.9% 4.2% 4.5% 133.5 4.2 3.2 10.9% 4.2% 4.5% 133.5 4.0 3.2 10.9% 4.2% Forecast Number of stores Net sales Cost of sales Gross profit Cash operating expenses Depreciation & amortization EBIT NOPAT 744 22,111 15,743 6,368 4,036 534 1,798 1,133 870 26,502 18,764 7,739 4,691 640 2,408 1,507 1,008 31,400 22,137 9,263 5,652 758 2,853 1,783 1,147 36,958 26,055 10,903 6,652 893 3,357 2,098 1,296 43,573 30,719 12,854 7,712 1,053 4,089 2,556 1,464 52,026 36,679 15,348 9,125 1,257 4,966 3,104 853 166 3,611 291 4,921 1,715 221 922 1,023 198 4,304 291 5,816 2,044 221 1,105 1,287 235 5,077 291 6,891 2,411 221 1,309 1,515 277 6,204 291 8,287 2,838 221 1,541 1,961 326 7,314 291 9,892 3,346 221 1,817 2,341 390 9,170 291 12,191 3,995 221 2,169 Assumptions Cash and ST investments Accounts receivable Merchandise inventory Other current assets Total current assets Accounts payable Accrued salaries and wages Other current liabilities VALUE LINE PUBLISHING, Current liabilities Working capital Net property and equipment Other assets Total capital Return on capital 2,858 2,063 8,653 162 10,878 10.4% 3,370 2,446 10,372 162 12,980 11.6% 3,941 2,949 11,214 162 14,326 12.4% 4,600 3,687 12,319 162 16,168 13.0% 5,384 4,508 13,617 162 18,287 14.0% 6,385 5,806 16,258 162 22,226 14.0%