Daniel manages the event$-$planning segment of a large rental business. As such, there are many costs to consider when setting rental prices for his items. He recognizes there is demand for a very large tent, which the business currently doesn't have. The tent would cost $$10,500$ and should last five years if handled properly. He estimates net rental revenue to be approximately $$5,900$ per year, with additional set$-$up costs of $$2,750$ per year. Before making this purchase, he runs analyses to ensure the purchase is viable for his segment and the company overall.

$($a$)$

$$ Your answer is correct.

Calculate the ROI of this investment, recognizing straight$-$line depreciation will apply to this new asset.

ROI $\%$

eTextbook and Media

Attempts: $1$ of $5$ used

$($b$)$

Your answer is incorrect.

Calculate the residual income $($RI$)$ of this investment, assuming the company's minimum required return is $9\%.$

Residual income