Err Company has a major lawsuit against them for unsafe products. It recognizes a huge liability in 2008 of $300M. The effect of this liability is to…

Err Company has a major lawsuit against them for unsafe products. It recognizes a huge liability in 2008 of $300M. The effect of this liability is to decrease stockholders’ equity by 50%. In 2009, the effect of recognizing this lawsuit in 2008, all else being equal in 2009, is: A)Return on net operating assets will increase dramatically B)Return on net operating assets will decrease dramatically C)Return on equity will increase dramatically D)Return on equity will decrease dramatically The effects of leveraging are magnified in A)good years.B)bad years. C)both good and bad years. D)years that the company is unsuccessfully trading on the equity. TMTOMH Company reported in its annual report software refinement expenses of $12M, $15M and $18M for fiscal years 2007, 2008 and 2009, respectively. At the end of fiscal 2009 it had total assets of $140M. Net income was $20M for fiscal 2009, and it had a marginal tax rate of 35%. 7. If software refinement had been capitalized each year and amortized over a three-yearperiod beginning in the year the cost was incurred, total assets at the end of fiscal 2009 would have been: A)$185M B)$172M C)$158M D)$157M 8. If software refinement had been capitalized each year and amortized over a three year period beginning in the year the cost was incurred, net income for fiscal 2009 would have been: A)$31.7M B)$29.75M C)$21.95M D)$14.95M