Violet company has sales of $466,000, net operating income of $256,000, average

Question

Violet company has sales of $466,000, net operating income of $256,000, average invested assets of $806,000, and a hurdle rate of 11%.

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a Most Visrted myutrgv.eduì? ALGEBRA O Login. CH 10 Quuz Instructions I help Question 1 (of 10) Save & Exit Submit Time remaining: 0:57:16 Violet Company has sales of $466,000, net operating income of $256,000, average invested assets of $806,000, and a hurdle rate of 11.00 percent Calculate Violet's return on investment and its residual income (Enter your ROI answer as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%) Round your Residual Income (Loss) answer to the nearest whole dollar.) Return on Investment (ROI Residual Income (Loss) lacro ll Sc2 1080 30 29. Chapter 10 test banko Study Notes

Explanation / Answer

Solution: ROI = 31.76%; RI = 167,340

Working:

Return on Investment = Net Income – Interest + Taxes / Average Total Assets

256,000 / 806,000 * 100 = 31.76%

Residual Income = Operating Income – (Average Total Assets * Hurdle ROR)

256,000 - (806,000*11%) = 167,340

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