Apple's Rnoa

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Module 3 HWK
1. What is Apple’s RNOA in 2009? Show your calculations. NOPAT=NOPBT-Tax expense-Tax shield
=7,658-(2,280-35%*326)
=5,492.1
NOA for 2008=26,957-18,542=8,415
NOA for 2009=25,122-26,019=-897
Average NOA= {8,415+(-897)}/2=3,759
So, RNOA=5492.1/3759=1.46
2. Suppose that Apple paid $1 billion in dividends during 2009 in response to criticism by the financial community that it carries too much cash and marketable securities (see the article available on Elearning), and recalculate RNOA. NOA for 2009=-897-1,000=-1,897

Average NOA=(-1,897+8,415)/2=3,259
RNOA=5492.1/3259=1.69
3. What is the effect of carrying too much cash on the balance sheet on RNOA? Does it make it lower or higher? Explain. Carrying too much cash will increase operating assets so that NOA will increase. Average NOA will go up and as a result RNOA will be lower. 4. What is the effect of carrying too many marketable securities on RNOA? Does it make it lower or higher? Explain. Marketable securities are very liquid and can be turned into cash quickly. Thus they have the same effect on RNOA as cash. So RNOA is lower. 5. Why does the article criticize Apple for carrying too much cash and marketable securities? Apple is criticized because it doesn’t pay dividends to stockholders while it carries too much cash and marketable securities. Also it invests most of money in low-yielding investments, which is harder for investors to earn extravagant returns. Apple should issue corporate bonds to add value and give stockholders benefit.
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