Question

If net operating income is $83,000, average operating assets are $415,000, and the minimum required rate of return is 13%, what is the residual income?
a. $33,200
b. $24,900
c. $107,900
d. $58,100

Answer 1

Answer:

$29,050

Explanation:

The computation of the residual income is shown below:

Residual income = Net operating income - Minimum required income  

= $83,000 - $53,950  

= $29,050  

Here

Minimum required income   =   Average operating assets × Minimum required rate of return  

= $415,000 × 13%    

= $53,950

This should be the answer and the options provided are wrong