A family friend has asked your help in analyzing the operations of three anonymo

Question

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 percentagei.e., 0.12 should be entered as 12).) Company Sales Net operating income Average operating assets Return on investment (ROI) Minimum required rate of return: $370,000 24,800 $155,000 $710,000 $43,000 $226,316 $610,000 $145,000 16% 19% Percentage 141% 21% 141% Dollar amount $48,000 Residual income 3,100 7,000 Referen ces eBook &Resources;

Explanation / Answer

1. Company A -

Minimum required rate of return = 155000 ×14% = 21700

2. Company C-

Minimum required rate of return (Dollar Amount) = 145000×14% = $20,300

Net operating Income = 20300+7000 = $27300

Return on investment =( 27300/145000)×100 = 19%

Particulars A B C Sales 370000 710000 610000 Net operating Income 24800 43000 27300 Average Operating Assets 155000 226316 145000 Return on Investment (ROI) 16% 19% 19% Minimum required rate of return:- Percentage 14% 21% 14% Dollar Amount 21700 48000 20300 Residual Income 3100 -5000 7000

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