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Indigo Corp. has an ROI of 15% and a residual income of $10,120. If operating income equals $34,500, what is the hurdle rate?
Florida Inc. has revenues of $751,000 resulting in an operating income of $76.000 Average invested assets total $380,000, the
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Answer #1

Ans

Hurdle Rate = 10.60%

Working:-

Residual Income = Operating Income - (Hurdle Rate x Investment)
10120 = 34500-(HR*34500/.15)
Hurdle Rate = 0.106
Hurdle Rate = 10.60%

Ans is 20%

Working:-

Return on investment = Operating income/ Average asset
= 76000/380000
= 0.2
= 20%
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