The Coca-Cola Company reported an after-tax profit margin of 20.0 percent on its sales of $24,088 million in 2006. It also reported $102 million of other core income, mainly from equity investments in its bottling companies. Further analysis of the financial statements reveals an asset turnover (on net operating assets) of 1.32. Coke uses a hurdle of 9 percent for its investment in operations.

a. What was Coke’s residual operating income for 2006?

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b. What would Coke’s residual operating income be if the asset turnover increased to 1.7?