OA 10,800 OL 1,800

NonOA 1,600 NonOL 600

EQ 10,000

Total 12,400 Total 12,400

Required:

(i)

Compute B/S items NOA and NNO.

NOA NNO

EQ

Total Total

If NNO is negative, what does that mean? It means it is a net financial asset instead of being a net financial obligation

(ii)

If RNOA =10% and NNEP =5%, construct the underlying I/S

NOPAT ??

NNE ??

NI ??

Compute ROE

(iii)

Verify that ROE=RNOA+(RNOA-NNEP)*FLEV. FLEV = NNO/EQ

Compute RNOA as a weighted average of ROE and NNEP

Compute ROE as a weighted average of RNOA and NNEP