a.

Operating income 5918

-provision for income taxes 1592
-Interest exepense(163*37%) 60.31
NOPAT 4266

b. 2006 2005
total assets 30156 27250
less:
cash and equivalents 3377 3040
marketable securities-current 1101 744
marketable securities-non current 540 825
investments 146 103
total current liabilities 6089 4897
short term borrowings & current portion of LTD -1269 -613
Pension & post retirement 2013 2227
oher liabilites 1854 1727
NOA 16305 14300

c.

RNOA=NOPAT / Avg. NOA

NOPAT 4266
Avg NOA(16305+14300)/2 15302.5
RNOA = 4266/15303 27.88%

NOPM=NOPAT/NET SALES
NOPAT 4266
Net sales 26662
NOPM=4266/26662 16.00%

NOAT=NET SALES / Avg. NOA

Net sales 26662
Avg NOA(16305+14300)/2 15302.5
NOAT=26662/15303 1.74

RNOA=16.00%*1.74= 27.88%

d.
2006 2005
short term borrowings & current portion of LTD 1269 613
Long term debt 4183 5097
less:
Cash equivalent 3377 3040
marketable securities-current 1101 744
marketable securities-non current 540 825
Investments 146 103
NNO 288 998

e.
Net income 4085
Avg. Stock holders equity 14213.5
(15663+12764)/2
ROE=4085/14214 28.74%

f.
ROE-RNOA= 0.86%
(27.88%-28.74%)

f. ROE > RNOA implies that 3M is able to borrow money to fund operating assets that yield
a return greater than the cost of the debt . The excess accrues to the benefit of 3M’s
stockholders
a.
Operating income 5918
-provision for income taxes 1592
-Interest exepense(71*36%) 60.31
NOPAT 4266

b. 2006 2005
total assets 30156 27250
less:
cash and equivalents 3377 3040
marketable securities-current 1101 744
marketable securities-non current 540 825
investments 146 103
total current liabilities 6089 4987
short term borrowings & current portion of LTD -1269 -613
Pension & post retirement 2013 2227
oher liabilites 2022 1899
NOA 16137 14038

c.

RNOA=NOPAT / Avg. NOA

NOPAT 4266
Avg NOA(16137+14038)/2 15087.5
RNOA = 4266/15088 28.27%

NOPM=NOPAT/NET SALES
NOPAT 4266
Net sales 26662
NOPM=4266/26662 16.00%

NOAT=NET SALES / Avg. NOA

Net sales 26662
Avg NOA(16137+14038)/2 15087.5
NOAT=26662/15088 1.77

RNOA=17.22%*2.03= 28.27%

d.
2006 2005
short term borrowings & current portion of LTD 1269 613
Long term debt 4183 5097
less:
Cash equivalent 3377 3040
marketable securities 1101 744
Investments 146 103
NNO 828 1823

e.
Net income 4085
Avg. Stock holders equity 14213.5
(15663+12764)/2
ROE=4085/14214 28.74%

f.
ROE-RNOA= 0.47%
(28.27%-28.74%)

f. ROE > RNOA implies that 3M is able to borrow money to fund operating assets that yield
a return greater than the cost of the debt . The excess accrues to the benefit of 3M’s
stockholders
a.
Operating income 5696
-provision for income taxes 1723
-Interest exepense(71*36%) 25.56
NOPAT 3947

b. 2006 2005
total assets 21294 20541
less:
cash and equivalents 1447 1072
marketable securities-current 471 0
marketable securities-non current 166 0
investments 314 272
total current liabilities 7323 5238
short term borrowings & current portion of LTD -2506 -1072
Pension & post retirement 0 0
oher liabilites 2965 3599
NOA 11114 11432

c.

RNOA=NOPAT / Avg. NOA

NOPAT 3947
Avg NOA(11114+11432)/2 11273
RNOA = 3947/11273 35.02%

NOPM=NOPAT/NET SALES
NOPAT 3947
Net sales 22923
NOPM=3947/22923 17.22%

NOAT=NET SALES / Avg. NOA

Net sales 22923
Avg NOA(11114+11432)/2 11273
NOAT=22923/11273 2.03

RNOA=17.22%*2.03= 35.02%

d.
2006 2005
short term borrowings & current portion of LTD 2506 1072
Long term debt 1047 1309
less:
Cash equivalent 1447 1072
marketable securities-current 471 0
marketable securities-non current 166 0
Investments 314 272
NNO 1155 1037

e.
Net income 3851
Avg. Stock holders equity 10177
(9959+10395)/2
ROE=3851/10177 37.84%

f.
ROE-RNOA= 2.82%
(37.84%-35.02%)

f. ROE > RNOA implies that 3M is able to borrow money to fund operating assets that yield
a return greater than the cost of the debt . The excess accrues to the benefit of 3M’s
stockholders
a.
Operating income 5696
-provision for income taxes 1723
-Interest exepense(71*36%) 25.56
NOPAT 3947

b. 2006 2005
total assets 21294 20541
less:
cash and equivalents 1447 1072
marketable securities 637 0
investments 314 272
total current liabilities 7323 5238
short term borrowings & current portion of LTD -2506 -1072
Pension & post retirement 0 0
oher liabilites 2965 3599
NOA 11114 11432

c.

RNOA=NOPAT / Avg. NOA

NOPAT 3947
Avg NOA(11114+11432)/2 11273
RNOA = 3947/11273 35.02%

NOPM=NOPAT/NET SALES
NOPAT 3947
Net sales 22923
NOPM=3947/22923 17.22%

NOAT=NET SALES / Avg. NOA

Net sales 22923
Avg NOA(11114+11432)/2 11273
NOAT=22923/11273 2.03

RNOA=17.22%*2.03= 35.02%

d.
2006 2005
short term borrowings & current portion of LTD 2506 1072
Long term debt 1047 1309
less:
Cash equivalent 1447 1072
marketable securities 637 0
Investments 314 272
NNO 1155 1037

e.
Net income 3851
Avg. Stock holders equity 10177
(9959+10395)/2
ROE=3851/10177 37.84%

f.
ROE-RNOA= 2.82%
(37.84%-35.02%)