A firm reported the following income statement for 2016 (in millions of dollars):

Net Sales

20,367

Operating expenses

(17,484)

Restructuring charge

(65)

Operating profit

2,818

Gain on asset sales

1,083

Interest expense

(363)

Interest income

118

3,656

Provision for income taxes

1,606

Net income

2,050

Operating expenses include $1,230 million from expected returns on pension plan assets.

a. Reformulate this statement to distinguish operating items from financing items. Identify core operating income from sales, after tax. The firm’s statutory tax rate is 37%.

b. Calculate the effective tax rate on core operating income.

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