The following numbers were calculated from the financial statements of a firm for fiscal year 2006.

Net operating assets $107.5 million

Net financial obligations 22.7 million

Asset turnover, 2006 1.9

Core operating profit-margin, after tax 7.5%

(a) Calculate the core return on net operating assets for 2006.

(b) You forecast that the core profit margin and asset turnover in the future will be the same as in 2006. You also forecast that sales will grow at 4% per year in the future. The firms required return for its operations is 9%.

(i) Calculate the enterprise price-to-book ratio and enterprise value.

(ii) Calculate the levered price-to-book ratio.

(c) The firms 52 million outstanding shares are trading at $4.75 each. Given your forecasts, what is your expected rate of return from buying the firm at this price?