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Violet Company has sales of $457,000, net operating income of $249,000, average invested assets of $807,000,...

Violet Company has sales of $457,000, net operating income of $249,000, average invested assets of $807,000, and a hurdle rate of 12.00 percent. Calculate Violet’s return on investment and its residual income.

Return On Investment _____%

Residual Income (Loss) _____

(Enter your Return On Investment answer as a percentage rounded to two decimal places, (i.e., 0.1234 should be entered as 12.34%). Round your Residual Income (Loss) answer to the nearest whole dollar.)

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Answer #1

return on investment=Net operating income/Average invested assets

=249,000/807,000

=30.86%(Approx)

Residual income=Net operating income-(Average invested assets*Hurdle rate)

=249,000-(807,000*12%)

=$152160

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