Homework Answers
ANSWER
CURRENTLY:-
Return on investment (ROI)=net operating income /Average invested assets
=$139,000 /$569,000
=24.43%
Residual income =Net operating income - Average invested assets *required rate of return
=$139,000-$569,000*13.25%
=$63,607.5
Proposed Project :
Return on investment (ROI)=($139,000 +$50,000) /($569,000 +$92,000)
=189,000/661,000
=28.59%
Residual income =net operating income -Average invested *Return
=($189,000-($661,000)*13.25%)
=$189,000-87,582.5
=$101,417.5
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