Err Company Has a Major Lawsuit Against Them for Unsafe

Err Company has a major lawsuit against them for unsafe products. It recognizes a huge liability in 2004 of $300 million. The effect of this liability is to decrease stockholders' equity by 50%. In 2005, the effect of recognizing this liability, all else equal, 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.