Chapter 1 File Home Insert Draw Page Layout Formulas Data Review View Help Quick

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Chapter 1 File Home Insert Draw Page Layout Formulas Data Review View Help QuickE PROTECTED VIEW Be careful-files from the Internet can contain viruses. Unless you need to edit it's safer to stay in P Chapter 11:Applying Excel Al , || | |Chapter 11: A Data 4 Sales 5 Net operating income 6 Average operating assets 7 Minimum required rate of retum $25,000,000 $3,000.000 $10.000,000 25% 9 Enter a formula into each of the cells marked with a ? below Review Problem: Return on Investment (ROl) and Residual Incone 2 Compute the ROi 13 Margin 14 Turnower 15 RO 17 Compute the residual income 18 Average operating assets 19 Net operarting income O Minimum required return 21 Residual income 23 24 26 27 30 Chapter 11 Form 0 Type here to search

Explanation / Answer

Answer ' margin( also called as profit portion ) = 3000000

Turnover ( also called sales ) = 25000000

Formula for Return on investment is profit/sales

= 30000000/25000000

= 12%

Computation of residual income

Given average operating assets = 10000000

Net operating income = 3000000

Minimum required rate of return = 25%

Residual income =

Net operating income - (average operating assets × rate of return)

= 3000000 - (10000000 × 25%)

Residual income = 500000

Thank you

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