Question

Target Corporation operates as two reportable segments: Retail and Credit Card. The Retail Segment includes merchandising operations, including large-format general merchandise and food discount stores in the United States and a fully integrated online business. Target offers both everyday essentials and fashionable, differentiated merchandise at discounted prices.
The Credit Card Segment offers credit to qualified guests through branded proprietary credit cards, the Target Visa and the Target Card.

Required:
Assume a 35% tax rate.
1. Estimate the average useful life of each firm’s long-lived assets.
2. Calculate a revised estimate of Walmart’s 2009 depreciation expense using the estimated average useful life of Target’s assets. Use this amount to recalculate Wal-Mart’s income before taxes and net income.
3. Calculate a revised estimate of Target’s 2009 depreciation expense using the estimated average useful life of Walmart’s assets. Use this amount to recalculate Target’s 2009 income before taxes and net income.
4. Why might a financial analyst want to make adjustments in requirements 2 and 3?
5. What factors will affect the reliability and accuracy of the adjustments performed in requirements 2 and 3?



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  • CreatedSeptember 10, 2014
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