AutoSave ODS.) .” Man Sa.\". AnnaRose Baiser File Home Insert Draw Page La Formu

Question

AutoSave ODS.) .” Man Sa.". AnnaRose Baiser File Home Insert Draw Page La Formul Data Review View Help QuickB Tell me D X B13/B14 815 1 Chapter 11: Applying Exce 3 Data 4 Sales 5 Net operating income 6 Average operating assets $75,000,000 Minimum required rate of return 22% 9 Enter a formula into each of the cells marked wth a ? below 10 Review Problem: Return on Investment (ROI) and Residual Income Compute the ROI 13 Margn 14 Turnover 55 250,000 75,000 000 17 Compute the residual income 18 Average operating assets 19 Net operating income 20 Minimum required return 21 Residual income 15,000,000 S 5 250,000 22% 1,950,000 23 24 25 26 27 28 29 Chapter 11 Form Ready 100% O Type here to search oem?@

Explanation / Answer

3. a. ROI = Net Operating Income / Average Operating Assets = $ 5,250,000 / $ 15,000,000 = 0.35 or 35 %.

b. Residual Income = Net Operating Income - ( Average Operating Assets x Minimum Required Rate of Return).

Residual Income in this case is positive because the net operating income exceeds the minimum required income from the operating assets.

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