Assume a company reported the following results: Sales Variable expenses Contribution margin Fixed expenses $400,000 260,000 140,000 40,000 Net operating income $100,000 Average operating assets $475,000 If the company's minimum required rate of return on average operating assets is 16%, its residual income would be: Multiple Choice O $24,000. $25,000. $26,000. O $27,000.

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Loanable Funds Theory

The loanable funds theory is a neoclassical theory that determines the interest rate where the demand for loanable investments and supply of loanable funds intersect. To determine the interest rate, this theory employs linear regression and a demand curve. At the equilibrium point, demand for borrowings and demand for the issuance of borrowing funds are inextricably linked. This point of equilibrium should equalize demand and the supply of money available for borrowing.