value 10.00 points Exercise 11-9 Return on Investment (ROI) and Residual Income

Question

value 10.00 points Exercise 11-9 Return on Investment (ROI) and Residual Income Relations [LO11-1, LO11-2] 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 $420,000 $ 650,000 $48,000 $570,000 Sales Net operating income Average operating assets Return on investment (ROI) Minimum required rate of return $151,000 $158,000 18% 21% Percentage 13% 15% Dollar amount 41,000 Residual income 7,000

Explanation / Answer

Company A B C Sales 420000 650000 570000 Net operating income 27180 48000 30700 (151000*18%) (23700+7000) Average operating assets 151000               2,28,571.43 158000 (48000/21%) ROI 18% 21% Min required rate of return: Percentage 13% 18% 15% (41000/228571.43) Dollar amount 19630 41000 23700 (151000*13%) (158000*15%) Residual income 7550 7000 7000 (27180-19630) (48000-41000)

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