Accounting 208 - Chapter 11 Handout 2/Example Sales Less: Cost of Goods Sold Gross Profit Less: Operating Expenses Net Operating Income Less: Interest Expense Income Tax Expense Net Income $800,000 400,000 $380,000 280,000 $100,000 2,000 8,000 $ 80,000 company has average operating assets of $400,000. The minimum required return for the company is 12%. 1. Compute the return on investment (ROI) for the company 25% 2. Compute the residual income for the company 52,000 3. The company has a chance to enter into a special project. If the manager is being evaluated using ROI, then what percentage return would the project have to earn before the manager is likely to accept the project? Redo question 3 and assume that the manager is being evaluated using residual income. Now what percentage return would the project have to earn before the manager would be likely to accept it