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Question 1 2 pts Residual Income = $23000 Operating income = 42,164 Cost of Capital = 12% What is return on investment? Dont

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Answer #1

Answer- Return on investment =26.4%.

Explanation- Return on investment = = (Net operating income/ Average operating assets)*100

=(42164/159700)*100

= 26.4

Where-Residual income =Operating income –(Average operating assets*Required rate of return)

23000= 42164 –( Average operating assets*0.12)

Average operating assets = (42164-23000)/0.12

= 159700

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