Company A B C Sales $360,000 $720,000 $620,000 Net operating income $49,000 Aver

Question

Company A B C Sales $360,000 $720,000 $620,000 Net operating income $49,000 Average operating assets $152,000 $145,000 Return on investment (ROI) 23 % 15 % % Minimum required rate of return: Percentage 13 % % 10 % Dollar amount $46,000 Residual income $6,000 Company A B C Sales $360,000 $720,000 $620,000 Net operating income $49,000 Average operating assets $152,000 $145,000 Return on investment (ROI) 23 % 15 % % Minimum required rate of return: Percentage 13 % % 10 % Dollar amount $46,000 Residual income $6,000

Explanation / Answer

Company A B C Sales $360,000 $720,000 $620,000 Net operating income 152000*23% = 34960 $49,000 20500 Average operating assets $152,000 49000*100/15 = 326667 $145,000 Return on investment (ROI) 23 % 15 % 20500*100/145000 = 14.14% % Minimum required rate of return: Percentage 13 % 46000*100/326667 = 14% % 10 % Dollar amount 152000*13% = 19760 $46,000 145000*10% = 14500 Residual income 15200 3000 $6000

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