value: 2.00 points A family friend has asked your help in analyzing the operatio
ID: 2524708 • Letter: V
Question
value: 2.00 points 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. Enter your ROl and Rate of Return Percentage answers to the nearest percentage (i.e., 0.12 should be entered as 12).) Company S470,000 Sales Net operating income Average operating assets Return on investment (ROI) Minimum required rate of return: S 670,000 54,000 S 680,000 S 165,000 S 152,000 22 % 16% 15% 12% Percentage Dollar amount 60,000 Residual income 7,000Explanation / Answer
Company A
Net Operating Income
= $1,65,000 x 0.22
= $36,300
Minimum Required rate of return Dollar Amount
= $1,65,000 x 0.15
= $24,750
Residual Income
= $36300 - $24750
= $11,550
Company B
Average Operating Assets
= $54000 / 0.16
= $3,37,500
Minimum Required rate of return Percentage
= $60,000 / $337500
= 17.77 % or 18%
Residual Income
= $54000 - $60000
= - $6,000 (Negative)
Company C
Minimum Required rate of return Dollar Amount
= $152000 x 0.12
= $18,240
Net Operating Income
= $18240 + $7000
= $25,240
Return on Investment (ROI)
= $25,240 / $152000
= 16.61 % or 17% (Rounded)
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