For each of the actions, determine the effect on residual operating income for the fiscal year ended June 30, 2018 (see #s below)

ROPI = NOPAT - (Beginning NOA * WACC)

Cash	$100	Accounts Payable	$300
Accounts Receivable	300	Long-Term Debt	600
Inventory	500
PP&E	1000	Equity	1,000
Total Assets	$1,900	Total Liabilities & Equity	$1,900

	Actual	Forecasted
	June 2017	June 2018
Sales	$1,200	$1,310
NOPAT	$210	$216
NOA	$1,500	$1,545
WACC	7%

	2017	2018
ROPI	Answer	$Answer

The company is contemplating taking the following actions before the end of June 2017. (These actions are not reflected in any of the financial data reported above.) For each of the actions, determine the effect on residual operating income for the fiscal year ended June 30, 2018.

1. Reduce inventory by 10% which reduces accounts payable by 5%.

2. Decrease property, plant and equipment (PPE) by 20% with no consequent impact on NOPAT.

3. Engage in a sale leaseback of a major building. The company will sell 50% of its PPE at book value and increase rental costs by $30 after tax, per year.

4. Increase debt $300, which increases interest expense by $15.

Actual	Forecasted		Action
	June 2017	June 2018		1	2	3	4
NOPAT	$Answer	$Answer		Answer	Answer	Answer	Answer
NOABeg	Answer	$Answer		Answer	Answer	Answer	Answer
ROPI	Answer	$Answer		Answer	Answer	Answer	Answer