Question 8.3 (Total: 24 marks)

Financial data for Snape Company for last year appears below:

Snape Company
Statements of Financial Position
	Beginning Balance	Ending Balance
Assets:
Cash	$58,000	$78,000
Accounts receivable	28,000	27,000
Inventory	36,000	40,000
Plant and equipment (net)	123,000	113,000
Investment in Potter Company	82,000	102,000
Land (underdeveloped)	170,000	170,000
Total assets	$497,000	$530,000
Liabilities and owners' equity:
Accounts payable	$57,000	$70,000
Long-term debt	270,000	270,000
Owners' equity	170,000	190,000
Total liabilities and owners' equity	$497,000	$530,000

Snape Company
Income Statement
Sales		$413,000
Less operating expenses		352,000
Net operating income		61,000
Less interest and taxes:
Interest expense	$30,000
Tax expense	13,000	43,000
Operating Income		$18,000

The company paid dividends of $2,000 last year. The "Investment in Potter Company" on the statement of financial position represents an investment in the stock of another company.

Required:

1. Compute the company's margin, turnover, and return on investment for last year.
2. The Board of Directors of Snape Company have set a minimum required return of 20%. What was the company's residual income last year?