Residual income is the excess of operating income over the cost of capitalassociated with the deployed assets. Following is information for foursegments. Experiment with alternative rates of the cost of capital by usingthe pick list choices associated with the boxed area. Note how the relativeresidual income changes between the units based on the interest rateassumption!What do you wish to assume for the interest rate? >>>> 0%Segment A Segment B Segment C Segment DOperating income $ 1,200,000 $ 1,000,000 $ 750,000 $ 500,000Operating assets $ 8,000,000 $ 4,000,000 $ 2,000,000 $ 600,000Assumed interest rate X 0 X 0 X 0 X 0Cost of Capital $ - $ - $ - $ -Residual income $ 1,200,000 $ 1,000,000 $ 750,000 $ 500,000 What would be the Residual Income of Segment A? Flag question: Question 2 Question 21 pts What would be the Return on Asset (ROA) of Segment A in percentage? Note: To get a proper grade, for example, enter 0.35 if the ROA is 35% Flag question: Question 3 Question 31 pts What would be the Residual Income of Segment B? Flag question: Question 4 Question 41 pts What would be the Return on Asset (ROA) of Segment B in percentage? Note: To get a proper grade, for example, enter 0.35 if the ROA is 35% Flag question: Question 5 Question 51 pts What would be the Residual Income of Segment C? Flag question: Question 6 Question 61 pts What would be the Return on Asset (ROA) of Segment C in percentage? Note: To get a proper grade, for example, enter 0.35 if the ROA is 35% Flag question: Question 7 Question 71 pts What would be the Residual Income of Segment D? Flag question: Question 8 Question 81 pts What would be the Return on Asset (ROA) of Segment D in percentage? Note: To get a proper grade, for example, enter 0.35 if the ROA is 35% Flag question: Question 9 Question 91 pts If the company decides to give a bonus to managers based on Residual Income, which Segment's manager will get the bonus? Group of answer choices Segment D Segment C Segment B Segment A Flag question: Question 10 Question 101 pts If the company decides to give a bonus to managers based on ROA, which Segment's manager will get the bonus? Group of answer choices Segment A Segment B Segment D Segment C
Residual income is the excess of operating income over the cost of capitalassociated with the deployed assets. Following is information for foursegments. Experiment with alternative rates of the cost of capital by usingthe pick list choices associated with the boxed area. Note how the relativeresidual income changes between the units based on the interest rateassumption!What do you wish to assume for the interest rate? >>>> 0%Segment A Segment B Segment C Segment DOperating income $ 1,200,000 $ 1,000,000 $ 750,000 $ 500,000Operating assets $ 8,000,000 $ 4,000,000 $ 2,000,000 $ 600,000Assumed interest rate X 0 X 0 X 0 X 0Cost of Capital $ - $ - $ - $ -Residual income $ 1,200,000 $ 1,000,000 $ 750,000 $ 500,000 What would be the Residual Income of Segment A? Flag question: Question 2 Question 21 pts What would be the Return on Asset (ROA) of Segment A in percentage? Note: To get a proper grade, for example, enter 0.35 if the ROA is 35% Flag question: Question 3 Question 31 pts What would be the Residual Income of Segment B? Flag question: Question 4 Question 41 pts What would be the Return on Asset (ROA) of Segment B in percentage? Note: To get a proper grade, for example, enter 0.35 if the ROA is 35% Flag question: Question 5 Question 51 pts What would be the Residual Income of Segment C? Flag question: Question 6 Question 61 pts What would be the Return on Asset (ROA) of Segment C in percentage? Note: To get a proper grade, for example, enter 0.35 if the ROA is 35% Flag question: Question 7 Question 71 pts What would be the Residual Income of Segment D? Flag question: Question 8 Question 81 pts What would be the Return on Asset (ROA) of Segment D in percentage? Note: To get a proper grade, for example, enter 0.35 if the ROA is 35% Flag question: Question 9 Question 91 pts If the company decides to give a bonus to managers based on Residual Income, which Segment's manager will get the bonus? Group of answer choices Segment D Segment C Segment B Segment A Flag question: Question 10 Question 101 pts If the company decides to give a bonus to managers based on ROA, which Segment's manager will get the bonus? Group of answer choices Segment A Segment B Segment D Segment C
Chapter11: Capital Budgeting Decisions
Section: Chapter Questions
Problem 14MC: This calculation determines profitability or growth potential of an investment, expressed as a...
Related questions
Question
Residual income is the excess of operating income over the cost of capital
associated with the deployed assets. Following is information for four
segments. Experiment with alternative rates of the cost of capital by using
the pick list choices associated with the boxed area. Note how the relative
residual income changes between the units based on the interest rate
assumption!
What do you wish to assume for the interest rate? >>>> 0%
Segment A Segment B Segment C Segment D
Operating income $ 1,200,000 $ 1,000,000 $ 750,000 $ 500,000
Operating assets $ 8,000,000 $ 4,000,000 $ 2,000,000 $ 600,000
Assumed interest rate X 0 X 0 X 0 X 0
Cost of Capital $ - $ - $ - $ -
Residual income $ 1,200,000 $ 1,000,000 $ 750,000 $ 500,000
associated with the deployed assets. Following is information for four
segments. Experiment with alternative rates of the cost of capital by using
the pick list choices associated with the boxed area. Note how the relative
residual income changes between the units based on the interest rate
assumption!
What do you wish to assume for the interest rate? >>>> 0%
Segment A Segment B Segment C Segment D
Operating income $ 1,200,000 $ 1,000,000 $ 750,000 $ 500,000
Operating assets $ 8,000,000 $ 4,000,000 $ 2,000,000 $ 600,000
Assumed interest rate X 0 X 0 X 0 X 0
Cost of Capital $ - $ - $ - $ -
Residual income $ 1,200,000 $ 1,000,000 $ 750,000 $ 500,000
What would be the Residual Income of Segment A?
Flag question: Question 2
Question 21 pts
What would be the Return on Asset (ROA) of Segment A in percentage?
Note: To get a proper grade, for example, enter 0.35 if the ROA is 35%
Flag question: Question 3
Question 31 pts
What would be the Residual Income of Segment B?
Flag question: Question 4
Question 41 pts
What would be the Return on Asset (ROA) of Segment B in percentage?
Note: To get a proper grade, for example, enter 0.35 if the ROA is 35%
Flag question: Question 5
Question 51 pts
What would be the Residual Income of Segment C?
Flag question: Question 6
Question 61 pts
What would be the Return on Asset (ROA) of Segment C in percentage?
Note: To get a proper grade, for example, enter 0.35 if the ROA is 35%
Flag question: Question 7
Question 71 pts
What would be the Residual Income of Segment D?
Flag question: Question 8
Question 81 pts
What would be the Return on Asset (ROA) of Segment D in percentage?
Note: To get a proper grade, for example, enter 0.35 if the ROA is 35%
Flag question: Question 9
Question 91 pts
If the company decides to give a bonus to managers based on Residual Income, which Segment's manager will get the bonus?
Group of answer choices
Segment D
Segment C
Segment B
Segment A
Flag question: Question 10
Question 101 pts
If the company decides to give a bonus to managers based on ROA, which Segment's manager will get the bonus?
Group of answer choices
Segment A
Segment B
Segment D
Segment C
AI-Generated Solution
AI-generated content may present inaccurate or offensive content that does not represent bartleby’s views.
Unlock instant AI solutions
Tap the button
to generate a solution
Recommended textbooks for you
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning
Principles of Accounting Volume 2
Accounting
ISBN:
9781947172609
Author:
OpenStax
Publisher:
OpenStax College
Intermediate Financial Management (MindTap Course…
Finance
ISBN:
9781337395083
Author:
Eugene F. Brigham, Phillip R. Daves
Publisher:
Cengage Learning