Welcome to Westonci.ca, the Q&A platform where your questions are met with detailed answers from experienced experts. Get immediate and reliable answers to your questions from a community of experienced experts on our platform. Experience the convenience of finding accurate answers to your questions from knowledgeable experts on our platform.
Sagot :
Answer and Explanation:
The computation is shown below:
1. The return on investment is
As we know that
Return on Investment = Net operating profit ÷ average invested assets × 100
But before that the Net Operating Profit should be determined
Particulars Peak View Grand
Sales revenue $332,000 $233,000 $311,000
Less: Cost of
goods sold ($204,000) ($116,000) ($183,000)
Miscellaneous
operating Expenses ($36,000) ($30,000) ($33,000)
Net Profit $92,000 $87,000 $95,000
Now
Return on Investment is
For peak, it is
= $92,000 ÷ $1,310,000
= 7.02%
for view, it is
= $87,000 ÷ $920,000
= 9.46%
for grand, it is
= $95,000 ÷ $1,105,000
= 8.60%
2. The residual income is
We know that
Residual Income = Net operating income - (Minimum required rate of return × average invested assets)
For Peak, it is
= ($92,000 - (5.01% of $1,310,000)
= $26,369
For view, it is
= ($87,000 - (5.01% of $920,000)
= $40,908
And, for grand, it is
= ($95,000 - (5.01% of $1,105,000)
= $39,640
Thank you for your visit. We are dedicated to helping you find the information you need, whenever you need it. We hope our answers were useful. Return anytime for more information and answers to any other questions you have. Westonci.ca is your go-to source for reliable answers. Return soon for more expert insights.
