Exercise 11-9 Return on Investment (ROI) and Residual Income Relations [LO11-1,

Question

Exercise 11-9 Return on Investment (ROI) and Residual Income Relations [LO11-1, L011-2) 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. Round your percentage answers to nearest whole percent and other amounts to whole dollars.) Company $ 390,000 $ 590,000 Sales Net operating income Average operating assets Return on investment (ROI) Minimum required rate of return $ 700,000 S 54,000 S 158,000 $156,000 251 % 16% 181% 101% Percentage Dollar amount 52,000 Residual income 7,000

Explanation / Answer

Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Company Paticulars A B C Sales           390,000.00           700,000.00           590,000.00 Net operating Income A = 158,000*25% C = 15600 + 7000              39,500.00              54,000.00              22,600.00 Average operating assets B = 54000/16%           158,000.00           337,500.00           156,000.00 Return on investment ( ROI) C = 22600/156000 25.00% 16.00% 14.49% Minimum required rate of return Percentage B = 52000/337500 18.00% 15.41% 10.00% Dollar amount A = 158000*18% C = 156000*10%              28,440.00              52,000.00              15,600.00 Residual Income A = 39500 - 28440 B = 54000 - 5200              11,060.00                2,000.00                7,000.00

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