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Problem 11-15 Return on Investment (ROI) and Residual Income [LO11-1, LO11-2] Financial data for Joel de Paris, Inc., for last year follow: Joel de Paris,
Problem 11-15 Return on Investment (ROI) and Residual Income [LO11-1, LO11-2]
Financial data for Joel de Paris, Inc., for last year follow: |
Joel de Paris, Inc. Balance Sheet | ||||
Beginning Balance | Ending Balance | |||
Assets | ||||
Cash | $ | 133,000 | $ | 139,000 |
Accounts receivable | 339,000 | 488,000 | ||
Inventory | 567,000 | 484,000 | ||
Plant and equipment, net | 791,000 | 759,000 | ||
Investment in Buisson, S.A. | 402,000 | 427,000 | ||
Land (undeveloped) | 247,000 | 247,000 | ||
Total assets | $ | 2,479,000 | $ | 2,544,000 |
Liabilities and Stockholders' Equity | ||||
Accounts payable | $ | 372,000 | $ | 346,000 |
Long-term debt | 1,014,000 | 1,014,000 | ||
Stockholders' equity | 1,093,000 | 1,184,000 | ||
Total liabilities and stockholders' equity | $ | 2,479,000 | $ | 2,544,000 |
Joel de Paris, Inc. Income Statement | |||
Sales | $ | 4,070,000 | |
Operating expenses | 3,418,800 | ||
Net operating income | 651,200 | ||
Interest and taxes: | |||
Interest expense | $ 123,000 | ||
Tax expense | 198,000 | 321,000 | |
Net income | $ | 330,200 | |
The company paid dividends of $239,200 last year. The Investment in Buisson, S.A., on the balance sheet represents an investment in the stock of another company. |
Required: | |
1. | Compute the companys margin, turnover, and return on investment (ROI) for last year. (Round your answers to 2 decimal places.) |
Margin | |
TurnOver | |
ROI |
2. | The board of directors of Joel de Paris, Inc., has set a minimum required rate of return of 21%. What was the companys residual income last year? |
Net Operating Income | |
Min required return | |
Residual Income |
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