Juniper Design Ltd. of Manchester, England, is a company specializing in providi
ID: 2447424 • Letter: J
Question
Juniper Design Ltd. of Manchester, England, is a company specializing in providing design services to residential developers. Last year the company had net operating income of $410,000 on sales of $1,100,000. The company’s average operating assets for the year were $1,300,000 and its minimum required rate of return was 10%.
Compute the company’s residual income for the year.
Average Operating Assets
Net Operating Income
Minimum required return
Residual income $
Juniper Design Ltd. of Manchester, England, is a company specializing in providing design services to residential developers. Last year the company had net operating income of $410,000 on sales of $1,100,000. The company’s average operating assets for the year were $1,300,000 and its minimum required rate of return was 10%.
Explanation / Answer
Average Operating Assets = 1,300,000
Net Operating Income = 410,000
Minimum required return = 10%
Residual income = Net Operating Income - Minimum required return *Average Operating Assets
Residual income = 410,000 - 10%*1,300,000
Residual income = $ 280,000
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.