Return on Investment (ROI) and Residual Income Relations [LO1, LO2] A family friend has asked your help
Question:
Return on Investment (ROI) and Residual Income Relations [LO1, LO2]
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:
Company A B C Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . $400,000 $750,000 $600,000 Net operating income . . . . . . . . . . . . . . $ ? $ 45,000 $ ?
Average operating assets . . . . . . . . . . . $160,000 ? $150,000 Return on investment (ROI) . . . . . . . . . . 20% 18% ?
Minimum required rate of return:
Percentage . . . . . . . . . . . . . . . . . . . . . 15% ? 12%
Dollar amount . . . . . . . . . . . . . . . . . . . $ ? $ 50,000 $ ?
Residual income . . . . . . . . . . . . . . . . . . $ ? $ ? $ 6,000
Step by Step Answer: