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Net Operating Assets

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A firm reports $3,721 million of net operating assets and %560 million of net financial obligations at the end of 2008. Its 105 million shares outstanding trade at $53 each. You expect its current core RNOA of 18.6 percent to continue at the same level in the future and also expect net operating assets to grow at 4 percent per year. What rate of return do you expect from investing in this stock?

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Solution Summary

The solution computes rate of return do you expect from investing in a stock with given net operating assets, net financial obligations, RNOA.

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RNOA = Operating Income / NOA
Earnings available for common shareholders = Operating Income - Net Financial Obiligations.

We have RNOA = 18.6%; NOA = 3721, 2009 NOA = 3721*(1+.04) = 3870;NFO = 560; ...

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