Problem:
Before going into year-end closing a company has operating income of $40,000 with a marginal tax rate of 25%. Operating assets are $500,000 and operating liabilities are $200,000.
Required:
Question 1: What is the RNOA?
Question 2: If the CFO moves $50,000 of cash into a marketable security (FA) and OL remain the same, what is the new RNOA?
Question 3: What is this an example of?
Note: Please show how you came up with the solution.