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Jefferson Memorial Hospital is an investment center as a division of Hospitals United. During the past year, Jefferson reported an after-tax income of $7.1
Jefferson Memorial Hospital is an investment center as a division of Hospitals United. During the past year, Jefferson reported an after-tax income of $7.1 million. Total interest expense was $3,100,000, and the hospital tax rate was 30%. Total assets totaled $69.7 million, and non-interest-bearing current liabilities were $22,700,000. The required rate of return established by Jefferson is equal to 17% of invested capital. What is the residual income of Jefferson Memorial Hospital? Enter your answer in whole dollar. 3,160,000 Feedback Check My Work Invested capital is determined using total assets and non-interest-bearing current liability amounts. Net operating income after taxes must then be determined which uses net income, interest expense after subtracting the portion related to tax savings. Residual income uses net operating income after tax, the cost of capital percentage, and invested capital in its calculations. Refer to the text for the formulas to be used implementing the components mentioned above.
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