1. Question 1 (15 points) The following is a comparative balance sheet for a manufacturing firm at the end of fiscal year 2025 (in millions of dollars.) 2025 2024 2025 2024 Cash 0 0 Accounts payable 1200 1040 Short-term investments 550 500 Accrued liabilities 390 450 (at market) Accounts receivable 940 790 Long-term debt 1840 1970 Inventory 910 840 Common equity 1870 1430 Property and plant 2900 2760 5300 4890 5300 4890 Sales revenue is a forecasted to grow at a 6% per year in the future with a constant asset turnover of 1.25. Operating future with a constant asset turnover of 1.25. Operating profit margins of 14% are expected to be earned each year in the future. Use a cost of capital for operations of 9%. Assume that there is no tax. a. Forecast return on net operating assets (RNOA) for year 2026. (3 point) b. Forecast residual operating income for year 2026. (Hint: Calculate net operating assets at the end of year 2025 based on the information on above B/S and apply RNOA in question (a).) (6 points) C. With the above information, value the equity at the end of the year 2025 using residual operating income valuation methods. (6 points) 1. Question 1 (15 points) The following is a comparative balance sheet for a manufacturing firm at the end of fiscal year 2025 (in millions of dollars.) 2025 2024 2025 2024 Cash 0 0 Accounts payable 1200 1040 Short-term investments 550 500 Accrued liabilities 390 450 (at market) Accounts receivable 940 790 Long-term debt 1840 1970 Inventory 910 840 Common equity 1870 1430 Property and plant 2900 2760 5300 4890 5300 4890 Sales revenue is a forecasted to grow at a 6% per year in the future with a constant asset turnover of 1.25. Operating future with a constant asset turnover of 1.25. Operating profit margins of 14% are expected to be earned each year in the future. Use a cost of capital for operations of 9%. Assume that there is no tax. a. Forecast return on net operating assets (RNOA) for year 2026. (3 point) b. Forecast residual operating income for year 2026. (Hint: Calculate net operating assets at the end of year 2025 based on the information on above B/S and apply RNOA in question (a).) (6 points) C. With the above information, value the equity at the end of the year 2025 using residual operating income valuation methods. (6 points)