Calculate Residual Income for 2011, assuming Carmax?s average cost of capital is 5%. ?Logically and neatly, show your work steps, and your answer. ?Assume that ?Net Income? is Operating Income, and that all assets are operating assets.

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Financial Statements for Module Seven Problem & Discussion Quiz Carmax, Inc. Income Statement Years Ended February 28, 2011 and February 28, 2010 (in millions) Net sales Cost of goods sold Gross margin Selling and administrative expenses Operating income Interest expense Other income (expenses; net) Income before taxes Income tax expense Net income 2011 $ 8,976 7,674 $1,302 905 $ 397 3 220 $ 614 233 $ 381 2010 $7,470 6,371 $1,099 819 $ 280 3 176 $ 453 171 $ 282 Assets Current assets Cash and cash equivalents Accounts receivable (net) Merchandise inventory Other current assets Total current assets Noncurrent assets Property, plant and equipment (net) Other assets Total assets February 28, 2011 and February 28, 2010 (in millions) Liabilities and shareholders' equity Current liabilities Accounts payable and other liabilities Short-term debt Income taxes payable and deferred taxes Total current liabilities Carmax, Inc. Balance Sheet Noncurrent liabilities Long-term debt Other liabilities Shareholders' equity Common stock Retained earnings Total liabilities and shareholders' equity 2011 $ 202 120 1,049 39 $1,410 920 4,510 $6,840 $ 373 134 1 $ 508 3,909 131 934 1,358 $6,840 2010 $18 682 843 13 $1,556 894 106 $2,556 $ 348 123 6 $ 477 27 118 858 1,076 $2,556 Financial Statements for Module Seven Problem & Discussion Quiz Carmax, Inc. Income Statement Years Ended February 28, 2011 and February 28, 2010 (in millions) Net sales Cost of goods sold Gross margin Selling and administrative expenses Operating income Interest expense Other income (expenses; net) Income before taxes Income tax expense Net income 2011 $ 8,976 7,674 $1,302 905 $ 397 3 220 $ 614 233 $ 381 2010 $7,470 6,371 $1,099 819 $ 280 3 176 $ 453 171 $ 282 Assets Current assets Cash and cash equivalents Accounts receivable (net) Merchandise inventory Other current assets Total current assets Noncurrent assets Property, plant and equipment (net) Other assets Total assets February 28, 2011 and February 28, 2010 (in millions) Liabilities and shareholders' equity Current liabilities Accounts payable and other liabilities Short-term debt Income taxes payable and deferred taxes Total current liabilities Carmax, Inc. Balance Sheet Noncurrent liabilities Long-term debt Other liabilities Shareholders' equity Common stock Retained earnings Total liabilities and shareholders' equity 2011 $ 202 120 1,049 39 $1,410 920 4,510 $6,840 $ 373 134 1 $ 508 3,909 131 934 1,358 $6,840 2010 $18 682 843 13 $1,556 894 106 $2,556 $ 348 123 6 $ 477 27 118 858 1,076 $2,556

Answer rating: 100% (QA)

Operating income 381 Operating asset 684... View the full answer