2. AMCE reported the following results for the past two years.

2018 2017

Profit margin 7.0% 5.0%

Asset turnover 2.0 2.5

Net borrowing cost (NBC) 3.0% 3.3%

Average net financial obligations (millions) $2,250 $1,000

Average common equity (millions) $4,500 $4,000

A. Calculate the return on net operating assets (RNOA) and show how much of its change from 2017 to 2018 is due to change in profit margin and the change in asset turnover. (4 points)

B. Explain how much of the change in ROCE from 2017 to 2018 is due to operating activities and how is due to financing activities. (4 points)