Problem 10-15 Return on Investment (ROI) and Residual Income [LO10-1, LO10-2]

Financial data for Joel de Paris, Inc., for last year follow:

Joel de Paris, Inc. Balance Sheet
	Beginning Balance			Ending Balance
Assets
Cash	$	137,000		$	131,000
Accounts receivable		343,000			490,000
Inventory		567,000			488,000
Plant and equipment, net		883,000			861,000
Investment in Buisson, S.A.		397,000			434,000
Land (undeveloped)		252,000			246,000
Total assets	$	2,579,000		$	2,650,000
Liabilities and Stockholders' Equity
Accounts payable	$	378,000		$	337,000
Long-term debt		979,000			979,000
Stockholders' equity		1,222,000			1,334,000
Total liabilities and stockholders' equity	$	2,579,000		$	2,650,000

Joel de Paris, Inc. Income Statement
Sales					$	4,875,000
Operating expenses						4,046,250
Net operating income						828,750
Interest and taxes:
Interest expense	$	114,000
Tax expense		207,000				321,000
Net income					$	507,750

The company paid dividends of $395,750 last year. The Investment in Buisson, S.A., on the balance sheet represents an investment in the stock of another company. The company's minimum required rate of return of 15%.

Required:

1. Compute the company's average operating assets for last year.

2. Compute the companys margin, turnover, and return on investment (ROI) for last year. (Do not round intermediate calculations and round your final answers to 2 decimal places.)

3. What was the companys residual income last year?

Chapter 10: Homework Saved Help Save & Exit Submit Check my work Accounts payable Long-term debt Stockholders' equity Total liabilities and stockholders' equity $ 378,000 979, 000 1, 222,000 $2,579,000 $ 337,000 979,000 1,334,000 $2,650,000 points eBook $4,875,000 4,046,250 Joel de Paris, Inc. Income Statement Sales Operating expenses Net operating income Interest and taxes: Interest expense $114,000 Tax expense 207,000 Net income 828,750 Print References 321,000 507,750 $ The company paid dividends of $395,750 last year. The "Investment in Buisson, S.A.," on the balance sheet represents an investment in the stock of another company. The company's minimum required rate of return of 15%. Required: 1. Compute the company's average operating assets for last year. 2. Compute the company's margin, turnover, and return on investment (ROI) for last year. (Do not round intermediate calculations and round your final answers to 2 decimal places.) 3. What was the company's residual income last year? 1. 2. Average operating assets Margin Turnover ROI Residual income 3