a. What would be Home Depot's economic value added if its cost of capital were 8%?

b. Would this have any impact on its accounting profits?

c. Which do you think is a better measure of the firm's performance?

INCOME STATEMENT

(Figures in millions of dollars)

"2009 Home Depot"

Net sales ................................................. $66,176.00

Cost of goods sold ........................................43,764.00

Selling, general, & administrative expenses ...........15,907.00

Depreciation ..................................................1,806.00

Earnings before interest and income taxes ...............4,699.00

Net interest expense...........................................676.00

Taxable income ..............................................4,023.00

Taxes ..........................................................1,362.00

Net income ...................................................2,661.00

Allocation of net income

Dividends ....................................................1,525.00

Addition to retained earnings .............................$1,136.00

Assets Current assets 2009 2008 Cash and cash equivalents Receivables Inventories Other current assets S 1,421.00 S 519.00 972.00 10,188.00 10,673.00 1,327.00 1,198.00 13.900.00 13.362.00 964.00 Total current assets Fixed Assets Net tangible fixed assets Total intangible fixed assets 25,550.0026,234.00 1,171.00 1134.00 26,721.00 27,368.00 434.00 40,877.00 41,164.00 Total fixed assets Other assets 256.00 Total assets Liabilities and Shareholders' Equitv Current liabilities 1,020.001,767.00 8,185.008,221.00 1,158.00 1165.00 10.363.00 11,153.00 8.662.00 9.667.00 2,459.002,567.00 21.484.00 23.387.00 Debt due for r Accounts payable Other current liabilities Total current liabilities Long-term debt Other long-term liabilities Total liabilities Shareholders e Common stock and other Retained earnings Treasury stock 6,390.006,133.00 13.588.00 12.452.00 (585.00)(808.00) Total shareholders' equity Total liabilities and shareholders' equity S40,877.00 S41,164.00 BALANCE SHEET (Figures in millions of dollars)