RBK10
May 12, 2009, 10:32 AM
Help...I am a student trying to figure out a question?
My ROI is 15%, Sales $180,000, Average Operating Assets $80,000, Minimum required rate of return 10%, Profit Margin 7.5% I need to calculate the residual income. However, my answer doesn't come close to any of the selections I am given.
Here is what I did.
Calculated the net income as 80,000 Avg Ope Asset X 15% ROI = Net Income of 12,000
12,000 - rate of return (10% of 80,000) = 8,000
= 4,000 Residual Income.
I have checked all my texted books and it appears that I am calculating correctly.
My question is what am I doing wrong?
My ROI is 15%, Sales $180,000, Average Operating Assets $80,000, Minimum required rate of return 10%, Profit Margin 7.5% I need to calculate the residual income. However, my answer doesn't come close to any of the selections I am given.
Here is what I did.
Calculated the net income as 80,000 Avg Ope Asset X 15% ROI = Net Income of 12,000
12,000 - rate of return (10% of 80,000) = 8,000
= 4,000 Residual Income.
I have checked all my texted books and it appears that I am calculating correctly.
My question is what am I doing wrong?