he operating income and the amount of invested assets in each division of Conley Industries are as follows: Operating Income Invested Assets etail Division $9,600,000 $40,000,000 ommercial Division 12,100,000 55,000,000 nternet Division 6,480,000 36,000,000 ssume that management has established a 15% minimum acceptable return for invested assets.
he operating income and the amount of invested assets in each division of Conley Industries are as follows: Operating Income Invested Assets etail Division $9,600,000 $40,000,000 ommercial Division 12,100,000 55,000,000 nternet Division 6,480,000 36,000,000 ssume that management has established a 15% minimum acceptable return for invested assets.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
![Residual Income
The operating income and the amount of invested assets in each division of Conley Industries are as follows:
Operating Income
Invested Assets
Retail Division
$9,600,000
$40,000,000
Commercial Division
12,100,000
55,000,000
Internet Division
6,480,000
36,000,000
Assume that management has established a 15% minimum acceptable return for invested assets.
a. Determine the residual income for each division.
Retail Division
Commercial Division
Internet Division
Operating income
$9,600,000
$12,100,000
$6,480,000
Minimum acceptable operating income as a percent of invested assets
Residual income
$4
$4
b. Which division has the most residual income?
Commercial Division
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Transcribed Image Text:Residual Income
The operating income and the amount of invested assets in each division of Conley Industries are as follows:
Operating Income
Invested Assets
Retail Division
$9,600,000
$40,000,000
Commercial Division
12,100,000
55,000,000
Internet Division
6,480,000
36,000,000
Assume that management has established a 15% minimum acceptable return for invested assets.
a. Determine the residual income for each division.
Retail Division
Commercial Division
Internet Division
Operating income
$9,600,000
$12,100,000
$6,480,000
Minimum acceptable operating income as a percent of invested assets
Residual income
$4
$4
b. Which division has the most residual income?
Commercial Division
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