Description of this paper

Explain the relationship between the ROI and the residual income

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solution


Question

Required;1. Check your worksheet by changing the average operating assets in cell B6 to $8,000,000. The;ROI should now be 38% and the residual income should now be $1,000,000. If you do not get;these answers, find the errors in your worksheet and correct them.;Explain why the ROI and the residual income both increase when the average operating;assets decrease.;2. Revise the data in your worksheet as follows;Data;Sales........................... $1,200;Net operating income.............. $72;Average operating assets........... $500;Minimum required rate of return...... 15%;a. What is the ROI?;b. What is the residual income?;c. Explain the relationship between the ROI and the residual income?

 

Paper#24196 | Written in 18-Jul-2015

Price : $27
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