Question 2 Compute NOPAT Using Tax Rates from Tax Footnote  The income statement for The TJX Companies, Inc., follows. THE TJX COMPANIES, INC.  Consolidated Statements of Income Fiscal Year Ended ($ thousands) January 27, 2007 Net sales $17,404,637 Cost of sales, including buying and occupancy costs 13,213,703 Selling, general and administrative expenses 2,923,560 Provision (credit) for computer intrusion related costs 4,960 Interest expense (revenue), net 15,566 Income from continuing operations before provision for income taxes 1,246,848 Provision for income taxes 470,092 Income from continuing operations 776,756 Gain/(loss) from discontinued operations, net of income taxes (38,717) Net income $ 738,039 U.S. federal statutory income tax rate 35.0% Effective state income tax rate 4.0% Impact of foreign operation -0.4% All other -0.9% Worldwide effective income tax rate 37.7% Compute TJX's NOPAT for 2007 using its income tax footnote disclosure. (The Federal and State tax rate for 2007 as reported by TJX's tax footnote is: 39.0%). Round to the nearest whole number. 2007 NOPAT = $Answer Question 3 Analysis and Interpretation of Profitability Balance sheets and income statements for Nordstrom, Inc. follow. Refer to these financial statements to answer the requirements. NORDSTROM, INC. Consolidated Statements of Earnings For Fiscal Years Ended ($ millions) 2010 2009 2008 Sales $ 8,258 $ 8,272 $ 8,828 Credit card revenues 369 301 252 Total revenues 8,627 8,573 9,080 Cost of sales and related buying and occupancy costs (5,328) (5,417) (5,526) Selling, general and administrative expenses Retail (2,109) (2,103) (2,130) Credit (356) (274) (177) Earnings before interest and income taxes 834 779 1,247 Net interest expense (138) (131) (74) Earnings before income taxes 696 648 1,173 Income tax expense (255) (247) (458) Net earnings $ 441 $ 401 $ 715 NORDSTROM, INC. Consolidated Balance Sheets ($ millions) January 30, 2010 January 31, 2009 Assets Current Assets Cash and cash equivalents $ 795 $ 72 Accounts receivable, net 2,035 1,942 Merchandise inventories 898 900 Current deferred tax assets, net 238 210 Prepaid expenses and other 88 93 Total current assets 4,054 3,217 Land, buildings and equipment, net 2,242 2,221 Goodwill 53 53 Other assets 230 170 Total assets $ 6,579 $ 5,661 Liabilities and Shareholders' Equity Current liabilities Accounts payable $ 726 $ 563 Accrued salaries, wages and related benefits 336 214 Other current liabilities 596 525 Current portion of long-term debt 356 299 Total current liabilities 2,014 1,601 Long-term debt, net 2,257 2,214 Deferred property incentives, net 469 435 Other liabilities 267 201 Shareholders' equity Common stock, no par value 1,066 997 Retained earnings 525 223 Accumulated other comprehensive income (loss) (19) (10) Total shareholders' equity 1,572 1,210 Total liabilities and shareholders' equity $ 6,579 $ 5,661 (a) Compute net operating profit after tax (NOPAT) ...

1. Question 2
Compute NOPAT Using Tax Rates from Tax Footnote
The income statement for The TJX Companies, Inc., follows.
THE TJX COMPANIES, INC.
Consolidated Statements of Income
Fiscal Year Ended ($ thousands)
January 27, 2007
Net sales
$17,404,637
Cost of sales, including buying and occupancy costs
13,213,703
Selling, general and administrative expenses
2,923,560
Provision (credit) for computer intrusion related costs
4,960
Interest expense (revenue), net
15,566
Income from continuing operations before provision for income
taxes
1,246,848
Provision for income taxes
470,092
Income from continuing operations
776,756
Gain/(loss) from discontinued operations, net of income taxes
(38,717)
Net income
$ 738,039
U.S. federal statutory income tax rate

2. 35.0%
Effective state income tax rate
4.0%
Impact of foreign operation
-0.4%
All other
-0.9%
Worldwide effective income tax rate
37.7%
Compute TJX's NOPAT for 2007 using its income tax footnote
disclosure. (The Federal and State tax rate for 2007 as reported
by TJX's tax footnote is: 39.0%). Round to the nearest whole
number.
2007 NOPAT = $Answer
Question 3
Analysis and Interpretation of Profitability
Balance sheets and income statements for Nordstrom, Inc.
follow. Refer to these financial statements to answer the
requirements.
NORDSTROM, INC.
Consolidated Statements of Earnings
For Fiscal Years Ended ($ millions)
2010
2009
2008
Sales
$ 8,258
$ 8,272
$ 8,828
Credit card revenues
369

3. 301
252
Total revenues
8,627
8,573
9,080
Cost of sales and related buying and occupancy costs
(5,328)
(5,417)
(5,526)
Selling, general and administrative expenses
Retail
(2,109)
(2,103)
(2,130)
Credit
(356)
(274)
(177)
Earnings before interest and income taxes
834
779
1,247
Net interest expense
(138)
(131)

4. (74)
Earnings before income taxes
696
648
1,173
Income tax expense
(255)
(247)
(458)
Net earnings
$ 441
$ 401
$ 715
NORDSTROM, INC.
Consolidated Balance Sheets
($ millions)
January 30, 2010
January 31, 2009
Assets
Current Assets
Cash and cash equivalents
$ 795
$ 72
Accounts receivable, net
2,035
1,942

5. Merchandise inventories
898
900
Current deferred tax assets, net
238
210
Prepaid expenses and other
88
93
Total current assets
4,054
3,217
Land, buildings and equipment, net
2,242
2,221
Goodwill
53
53
Other assets
230
170
Total assets
$ 6,579
$ 5,661
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable
$ 726

6. $ 563
Accrued salaries, wages and related benefits
336
214
Other current liabilities
596
525
Current portion of long-term debt
356
299
Total current liabilities
2,014
1,601
Long-term debt, net
2,257
2,214
Deferred property incentives, net
469
435
Other liabilities
267
201
Shareholders' equity
Common stock, no par value
1,066
997
Retained earnings
525
223
Accumulated other comprehensive income (loss)
(19)

7. (10)
Total shareholders' equity
1,572
1,210
Total liabilities and shareholders' equity
$ 6,579
$ 5,661
(a) Compute net operating profit after tax (NOPAT) for 2010.
Assume that the combined federal and statutory rate is: 37.0%.
(Round your answer to the nearest whole number.)
2010 NOPAT = $Answer
(b) Compute net operating assets (NOA) for 2010 and 2009.
2010 NOA = $Answer
2009 NOA = $Answer
(c) Compute RNOA, net operating profit margin (NOPM), and
net operating asset turnover (NOAT) for 2010. Do not use
NOPM x NOAT to calculate RNOA. (Do not round until final
answers. Round to two decimal places.)
2010 RNOA = Answer
%
2010 NOPM = Answer
%
2010 NOAT = Answer
(d) Compute net operating obligations (NNO) for 2010 and
2009.
2010 NNO = $Answer
2009 NNO = $Answer
(e) Compute return on equity (ROE) for 2010. (Round your
answers to two decimal places. Do not round until your final
answer.)

8. 2010 ROE = Answer
%
(f) Infer the nonoperating return component of ROE for 2010.
(Use answers from above to calculate. Round your answer to
two decimal places.)
2010 nonoperating return = Answer
%
(g) Comment on the difference between ROE and RNOA. Which
of the following statements best describes the inference from
the difference between Nordstrom's ROE and RNOA?
ROE>RNOA implies that Nordstrom's equity has grown faster
than its NOA. The faster increase of equity compared to NOA
allows higher dividends to be paid to Nordstrom's stockholders.
ROE>RNOA implies that Nordstrom is able to borrow money to
fund operating assets that yield a return greater than its cost of
debt. The excess accrues to the benefit of Nordstrom's
stockholders.
ROE>RNOA implies that Nordstrom has taken on too much
financial leverage. The high financial leverage results in a
higher interest rate on Nordstrom's debt, therefore the cost of
debt is greater.
ROE>RNOA implies that Nordstrom has increased its financial
leverage during the period. The increase in financial leverage
also increases Nordstrom's risk, therefore increasing the
expected ROE by Nordstrom's stockholders.
Question 4
Interpreting Foreign Currency Translation Disclosure
Bristol-Myers Squibb (BMY) reports the following table in its
10-K report relating to the change in sales from 2007 to 2008.
Analysis of % Change

9. Total Change
Volume
Price
Foreign Exchange
U.S. net sales
16%
9%
7%
--
Foreign net sales
10%
4%
1%
5%
Total net sales
13%
7%
4%
2%
(a) Includes Puerto Rico.
(b) Includes Russia and Turkey.
(c) Includes Japan, China, Canada, Australia and Brazil, among
other countries.
Hint: Do not enter any negative signs with your answers.
(a) By what percentage did U.S. net sales change during the
year? How much of this change is attributable to volume versus
price change?
2008 change in U.S. net sales: Answer by Answer
%
Volume change: Answer by Answer
%
Price change: Answer by Answer
%
Exchange rate: Answer by Answer

10. %
(b) By what percentage did foreign net sales change during the
year? How much of this change is attributable to volume versus
price change?
2008 change in foreign net sales: Answer by Answer
%
Volume change: Answer by Answer
%
Price change: Answer by Answer
%
Exchange rate: Answer by Answer
%
(c) Is the change in total net sales equal to the average of the
changes in U.S. and foreign net sales? What does this imply?
Yes, U.S. sales increase by 16 percent, and foreign sales
increase by 10 percent, for an average increase of 13%. This
implies that U.S. sales are much larger than foreign sales.
Yes, U.S. sales increase by 16 percent, and foreign sales
increase by 10 percent, for an average increase of 13%. This
implies that U.S. sales are much smaller than foreign sales.
Yes, U.S. sales increase by 16 percent, and foreign sales
increase by 10 percent, for an average increase of 13%. This
implies that U.S. sales and foreign sales are fairly close in
dollar terms.
No, the change in net sales is not equal to the average of the
changes in U.S. and foreign net sales because foreign sales are
much larger than U.S. sales.
Question 5
Constructing and Assessing Income Statements Using

11. Percentage-of Completion
On March 15, 2012, Frankel Construction contracted to build a
shopping center at a contract price of $120 million. The
schedule of expected (which equals actual) cash collection and
contract costs follow ($ millions):
Year
Cash Collections
Cost Incurred
2012
$ 30
$ 25
2013
50
20
2014
40
40
Total
$ 120
$ 85
(a) Calculate the amount of revenue, expense, and net income
for each of the three years 2012 through 2014 using the
percentage-of-completion revenue recognition
method. Rounding instructions: Round percentages to the
nearest whole number. Use rounded percentages for remaining
calculations. Round revenue and income to the nearest whole
number.
Percentage of Completion Method
Year
Costs incurred
Percent of total expected costs
Revenue recognized
Income

12. 2012
$Answer
Answer
%
$Answer
$Answer
2013
Answer
Answer
%
Answer
Answer
2014
Answer
Answer
%
Answer
Answer
$85
$120
$35
(b) Which of the following statements best summarizes our
conclusion about the usefulness of the percentage-of-completion
method for this company?
The percentage -of-completion method is not useful because it
does not provide information about the total revenues over the
life of the project.
The percentage-of-completion method is an acceptable method
under GAAP.
The percentage-of-completion method does not provide a good

13. estimate of the revenue and income earned in each period.
The percentage -of-completion method is not useful because it
is so dependent upon the completion estimate used by the
company and can be easily manipulated.
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Question 2
Compute NOPAT Using Tax Rates from Tax Footnote
The income statement for The TJX Companies, Inc., follows.
THE TJX COMPANIES, INC.
Consolidated Statements of Income
Fiscal Year Ended ($ thousands)
January 27, 2007
Net sales
$17,404,637
Cos
t of sales, including buying and occupancy costs
13,213,703
Selling, general and administrative expenses
2,923,560
Provision (credit) for computer intrusion related costs

16. 4,960
Interest expense (revenue), net
15,566
Income from continuing operations
before provision for income taxes
1,246,848
Provision for income taxes
470,092
Income from continuing operations
776,756
Gain/(loss) from discontinued operations, net of income taxes
(38,717)
Net income
$ 738,039
U.S. federal statutory income t
ax rate
35.0%

17. Effective state income tax rate
4.0%
Impact of foreign operation
-
0.4%
All other
-
0.9%
Worldwide effective income tax rate
37.7%
Compute TJX's NOPAT for 2007 using its income tax footnote
disclosure. (The Federal and
State tax rate for
2007 as reported by TJX's tax footnote is: 39.0%). Round to the
nearest whole
number.
2007 NOPAT = $Answer
0
Check
Question 3

18. Analysis and Interpretation of Profitability
Balance sh
eets and income statements for Nordstrom, Inc. follow. Refer to
these financial
statements to answer the requirements.