What is the ROI? (Leave no cells blank - be certain to enter \"0\" whether requi

Question

What is the ROI? (Leave no cells blank - be certain to enter "0" whether required. Omit the "%" sign in your response.) What is the residual income? (Negative amount should be identified by a minus sign. Omit the "$" sign in your response.) Why is the residual income negative? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with question mark to empty the box for a wrong answer.) Sales exceed average operating assets The ROI is less than the minimum required rate of return The ROI equals the minimum required rate of return The ROI exceeds the minimum required rate of return Average operating assets exceed not operating income Sales exceed net operating income

Explanation / Answer

a. ROI = profits/assets = 1,820,000/13,000,000 = 0.14 or 14% b. RI = income in excess of the cost of capital times the assets = 1,820,000 - 13,000,000*.27 = -1,690,000 c. answer: ROI is less than the required minimum rate of return. (three of the others are true statements - the ones involving sales/income/assets, but they do not answer the question - why is the residual income negative)

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