Question 2 Stanford company is a private and its management accountant department is planning to analyze its financial performance of its investment centre. They collected some information on the financial statement and decided to calculate the residual income of the company to get a better picture of the profit being generated by the company. Information for analysis is provided in the table below: 5 Current Assets Cash AC Receivable Inventory Current Liabilities Long Term Lisbilities Equity Equipment Property Plant Accumulated Depreciation - Plant 16.500 12.500 30.000 34,200 124,100 212.000 120,000 110,000 ? 28,500 Tax rate COGS 30% 59,500 Operating Expenses 34,200 Last Year Operating Assets 285,000 Sales 116,200 Interest on dobi 7.5% Government Bond rate 496 Market index Jan 2018 27680 Market index @ Dec 31, 2018 28960 Beta 1.7 Hint: Long term assets are always sated at Net Book Value All long term liabilities are debt Important -All workings should be shown. REQUIRED 1. Calculate Total Assets of the company using the accounting formula A-LE] 2. Calculato gross original cost of the plant and calculate the net book value of plant 3. Calculate operating assets. 4. Calculate EBIT, interest expense, tax. 3. Calculate return on equity (re) 6. Calculate Residual Income. 7. How does the residual income differ from Accounting income LEBITI 8. Why do we use Residual income instead of Net Income? [Hint: why we disregard tax and interest rate in this measure)