QUESTION 9 Partially correct 1.00 points out of 11.00 Flag question Question tex

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QUESTION 9

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Analysis and Interpretation of Profitability
Balance sheets and income statements for 3M Company follow.

(a) Compute net operating profit after tax (NOPAT) for 2006. Assume that the combined federal and statutory rate is: 36.0% (Round your answer to the nearest whole number.)
2006 NOPAT =Answer

($ millions)

(b) Compute net operating assets (NOA) for 2006 and 2005. Treat noncurrent Investments as a nonoperating item.
2006 NOA =Answer

($ millions)
2005 NOA =Answer

($ millions)

(c) Compute 3M's RNOA, net operating profit margin (NOPM) and net operating asset turnover (NOAT) for 2006. (Round your answers to two decimal places. Do not round until your final answer. Do not use NOPM x NOAT to calculate RNOA.)
2006 RNOA =Answer

%
2006 NOPM =Answer

%
2006 NOAT =Answer

(d) Compute net nonoperating obligations (NNO) for 2006 and 2005.
2006 NNO =Answer

($ millions)
2005 NNO =Answer

($ millions)

(e) Compute return on equity (ROE) for 2006. (Round your answers to two decimal places. Do not round until your final answer.)
2006 ROE =Answer

%

(f) What is the nonoperating return component of ROE for 2006? (Round your answers to two decimal places.)
2006 nonoperating return =Answer

%

Consolidated Statements of Income Years ended December 31 ($ millions) 2006 2005 2004 Net sales $22,923 $ 21,167 $ 20,011 Operating expenses Cost of sales 11,713 10,408 10,002 Selling, general and administrative expenses 5,066 4,631 4,437 Research, development and related expenses 1,522 1,274 1,246 Loss/(gain) from sale of business (1,074) -- -- Total operating expenses 17,227 16,313 15,685 Operating income 5,696 4,854 4,326 Interest expenses and income Interest expense 122 82 69 Interest income (51) (56) (46) Total interest expense 71 26 23 Income before income taxes 5,625 4,828 4,303 Provision for income taxes 1,723 1,627 1,400 Net income including noncontrolling interest 3,902 3,201 2,903 Less: Net income attributable to noncontrolling interest 51 55 62 Net income $ 3,851 $ 3,146 $ 2,841

Explanation / Answer

(a) Compute net operating profit after tax (NOPAT) for 2006. Assume that the combined federal and statutory rate is: 36.0% (Round your answer to the nearest whole number.) 2006 NOPAT = ($ millions) Operating income $5,696.00 Less: Provision for income taxes $1,723.00 Total interest expense--net ($71 x 36%) $25.56 NPOAT $3,947.44 Million (b) Compute net operating assets (NOA) for 2006 and 2005. Treat noncurrent Investments as a nonoperating item. ($ millions) ($ millions) NOA = 2006 2005 Total assets $21,294.00 $20,541.00 Less: Cash and cash equivalents $1,447.00 $1,072.00 Marketable securities-current $471.00 $0.00 Marketable securities-noncurrent $166.00 $0.00 Investments $314.00 $272.00 Total current liabilities $7,323.00 $5,238.00 Short-term borrowings and current portion of long-term debt $2,506.00 $1,072.00 Pension and postretirement benefits $0.00 $0.00 Other liabilities $2,965.00 $3,599.00 NOA $6,102.00 $9,288.00 (c) Compute 3M's RNOA, net operating profit margin (NOPM) and net operating asset turnover (NOAT) for 2006. (Round your answers to two decimal places. Do not round until your final answer. Do not use NOPM x NOAT to calculate RNOA.) 2006 RNOA = NPOAT/ Average NOA RNOA = $3947.44/(6102+9288)/2 51.30% NOPM = NPOAT/ Net Sales = $3947.44/$22,923 17.22% NOAT = Net sales / Average NOA = $22,923 /(6102+9288)/2 2.98 Confirm: RONA = NOPM x NOAT = 17.22% x 2.98 51.30%

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