Consider the following information for Executive Electronics.

Required
a. Evaluate the company in terms of residual income (RI), which is equivalent to EVA since there are no adjustments for accounting distortions.
b. While income has increased in fiscal 2012, is it clear that the company’s performance has improved?
c. Explain why the required rate of return increased in fiscal 2012.

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12/31/2011 12/31/2012 $11,500,000 $11,000,000 Total assets Noninterest-bearing current liabilities Net income Interest expense Tax rate Required rate of return 500,000 700,000 520,000 800,000 300,000 40% 12% 2,100,000 4096 1096