13. Avocado Company has an operating income of $80,000 on revenues ot $1,000,000

Question

13. Avocado Company has an operating income of $80,000 on revenues ot $1,000,000. Average invested assets are S500.000, and Avocado Company has an 8% cost of capital. What is the return on investment? zxo08 8% B. 10% a,16% D. 20% 14. Crawford Corp. has a RO of15% and a residual income o $10,000 if operating income equals $30, 000,what is the amount of average invested assets? A. $200,000 B. $66,667 C. $450,000 D. $150,000 15. Miami Corp. has an operating income of $120,000, average invested assets of $600,000, and a cost of capital of 7%. What is the residual income? A. $100,000 B. $166,667 C. $78,000 7grece D. $42,000

Explanation / Answer

13.

ROI=Net operating income/Average invested assets

=(80000/500,000)

=16%

14.

ROI=operating income/average invested assets

average invested assets=(30000/0.15)

=$200,000

15.

Residual income=operating income-(average invested assets*cost of capital)

=120000-(600,000*0.07)

=$78000.

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