Data for Schmidt Company are presented in the following table of rates of return
ID: 2445558 • Letter: D
Question
Data for Schmidt Company are presented in the following table of rates of return on investment and residual incomes:
Determine the missing values, identified by the letters above. For all amounts, round to the nearest whole number.
Invested Assets
Income from Operations
Rate of Return on Investment Minimum Rate of Return Minimum Acceptable Income from Operations
Residual Income $780,000 $179,400 (a) 13% (b) (c) $500,000 (d) (e) (f) $60,000 $20,000 $340,000 (g) 14% (h) $34,000 (i) $260,000 $49,400 (j) 12% (k) (l)
Explanation / Answer
Invested Assets Income from Operations Rate of Return on Investment Minimum Rate of Return Minimum Acceptable Income from Operations Residual Income $780,000 $179,400 23 13% 101400 78000 $500,000 80000 16 12 $60,000 $20,000 $340,000 47600 14% 10 $34,000 13600 $260,000 $49,400 19 12% 31200 18200 Income From Operations = Invested assets* Rate on Return on Investment Minimum Acceptable Income= Invested Assets* Minimum Rate of Return Residual Income = Income From Operations- Minimum Acceptable Income from Operations
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