Calculator Determining missing items in return and residual income computations

Question

Calculator Determining missing items in return and residual income computations Data for Uberto Company are presented in the following table of returns on investment and residual incomes: Minimum Minimum ble Residual Return on Invested Income from Return on Income from Income $216,000 $900,000 $510,000 $300,000 $230,000 13% $61,200 $20,400 14% $30,000 0) $46,000 0) 1296 Determine the missing values, identified by the letters above. For all amounts, round to the nearest whole number b. h. Chesk My Work 2 more Cheox My Won uses remaining 2 more Check My Work uses remaining

Explanation / Answer

(a) Return on investment = Income from operations / net Investment   *100   =$216000/$900000     *100 =24% (b) Minimum acceptable income from Opeartions = Invested amount * Minimum rate of return =$900,000 *13% =$117000 (c ) Residual income = Income from Operations - Minimum acceptable Income =$216000-$117000 =$99000 (d) Income from Operations = Minimum acceptable income from Opeartions + Residua;l Income =$61200+$20400 =$81600 (e ) Return on Investment = Inocme from Operations / Net Investment   *100 =$81600/$510000   *100 =16% (f) Minimum return on Investment =Minimum acceptable return /Net Investment    *100 =$61200/$510000 *100 =12% (g) Inocme from Operatoions = Net Investment * return on Investment =$300,000 *14% =$42000 (h) Minimum return on Investment =Minimum acceptable return /Net Investment    *100 =$30000/$300,000 *100 =10% (i) Residual income = Income from Operations - Minimum acceptable Income =$42000-$30000 =$12000 (j ) Return on Investment = Inocme from Operations / Net Investment   *100 =$46000/$230000   *100 =20% (k) Minimum acceptable income from Opeartions = Invested amount * Minimum rate of return =$230000 *12% =$27600 (l) Residual income = Income from Operations - Minimum acceptable Income =$46000-$27600 =$18400

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