A family friend has asked your help in analyzing the operations of three anonymo
ID: 2463839 • Letter: A
Question
A family friend has asked your help in analyzing the operations of three anonymous companies operating in the same service sector industry. Supply the missing data in the table below: (Loss amounts should be indicated by a minus sign.)
380,000
52,000
A family friend has asked your help in analyzing the operations of three anonymous companies operating in the same service sector industry. Supply the missing data in the table below: (Loss amounts should be indicated by a minus sign.)
Company A B C sales380,000
660,000 650000 net operating income ?52,000
? average operating assets 167,000 ? 151,000 ROI 16 % 16% ? % Minimum required rate of return Percentage 12% ? % 15% Dollar Ammount ? 58,000 ? REsidual Income ? ? 4,000Explanation / Answer
ROI= net operating income/ Avg operating assets
Doll ar amount= min required rate of return* avg operating asset
Residual income=net operating income-dollar amount
for A: ROI=16%=x/167000
net operating income=$26,720
dollar amount=12%*167000=$20,040
Residual income=26720-20040=6680
FOr B ROI=16%=52000/x
Avg operating asset=52000/16%=325,000
min required rate of return= 58000/325000=18%
residula income=-6000
FOr c:
Dollar amount= 15%*151000=22,650
Net operating ioncome=4000+22650=26650
ROI=26650/151000=18%
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