You decide to buy a new car. You talk to friends about it, research mechanical specifications in Consumer Reports, test drive di
1 answer:
You might be interested in
Answer:
profit margin: 6.04%
Assets turnover: 2.08
ROI 25.89%
Residual Income 137,330
Explanation:
<u><em>profit margin:</em></u>
income/sales = 326,480/5,404,000 = 0.060414507 = 6.0414507%
<u><em>Assets turnover:</em></u>
(2,561,000 + 2,629,000)/2 = 2,595,000 average assets
5,404,000/2,595,000 = 2.082466281 Assets TO
<u><em>ROI</em></u>
(1,206,000+1,316,000)/2 = 1,261,000 average equity
326,480/1,261,000 = 25.890563%
<u>Residual Income:</u>
current income - income at desired RoR
That means calculate which income generates a ROI of 15% which is the minimum required return:
ROI = income / equity = 0.15
X/1,261,000 = 0.15
X=1,261,000 x 0.15 = 189,150
Now we calculate the diference between this number and the current income.
326,480 - 189,150 = 137,330 Residual Income