Verify that your worksheet matches the Review Problem in the text.

Check your worksheet by changing the average operating assets in cell B6 to $9,000,000. The ROI should now be 33% and the residual income should now be $750,000. If you do not get these answers, find the errors in your worksheet and correct them.

Chapter 11: Applying Excel
Data
Sales	$25,000,000
Net operating income	$3,000,000
Average operating assets	$10,000,000
Minimum required rate of return	25%
Enter a formula into each of the cells marked with a ? below
Review Problem: Return on Investment (ROI) and Residual Income
Compute the ROI
Margin	?
Turnover	?
ROI	?
Compute the residual income
Average operating assets	?
Net operating income	?
Minimum required return	?
Residual income	?

Revise the data in your worksheet as follows:

1

2

3

4

5

6

7

Chapter 11: Applying Excel
Data
Sales	$56,000,000
Net operating income	$5,600,000
Average operating assets	$14,000,000
Minumum required rate of return	28%

If your formulas are correct, you should get the correct answers to the following questions.

a. What is the ROI?

b. What is the residual income? (Negative amount should be indicated by a minus sign.)

c. Why is the residual income positive?