Robichau Inc. reported the following results from last year\'s operations: Sales

Question

Robichau Inc. reported the following results from last year's operations: Sales Variable expenses Contribution margin Fixed expenses Net operating income Average operating assets $6,300,00e 4,930,000 1,370,000 803,000 $567,000 $3,eee,e00 At the beginning of this year, the company has a $900000 investment opportunity with the following characteristics $1,530,e80 Sales Contribution margin ratio Fixed expenses 30% of sales s 306,e00 The company's minimum required rate of return is 20%. The residual income for this year's investment opportunity when considered alone is closest to:

Explanation / Answer

Residual Income if only the investment is considered Net operating Income Contribution margin less Fixed expenses (1530000*30%)-306000 153000 Net operating Income 153000 Less: Min return (900000*20%) 180000 ResiduAL Income -27000 Option D -$27000 If any doubt please comment. If satisfied you can rate the answer

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