Homework Answers
Return on investment = net income / average invested assets
Net income = $203,000 - 113,000 - $38,000 = $52,000
Return on investment (ROI) = $52,000 / $913,000
Return on investment (ROI) = 5.70%
2) residual income (loss) = net income - (average invested assets * hurdle rate)
Residual income (loss) = $52,000 - (913,000 * 12.25%)
Residual income (loss) = $52,000 - $111,842.50
Residual income (loss) = -$59,842.50
Residual income (loss) = -$59,843 (rounded off)
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