At the end of fiscal year 2015, a firm reported the following in its balance sheet (in millions):

Net operating assets$500

Net financial obligations300

You forecast that the firm will earn a 20% return on common equity (ROCE) in 2016 (on beginning-of-year equity), after $15 million in net financial expenses (net of taxes). You also forecast that net operating assets will grow 6%. The board of directors has decided that the firm will pay $20 million in dividends in 2016, but there will be no share issues or repurchases.

Forecast for:

a.Return on net operating assets (RNOA) for 2016 (on beginning-of-year net operating assets).

b.Free cash flow for 2016

c.Net financial obligations at the end of 2016.

d.Calculate the financial leverage ratio (FLEV) at the end of 2015 and 2016.