Residual Income The operating income and the amount of invested assets in each division of Otte Industries are as follows: Operating Income Invested Assets Retail Division $94,600 $430,000 Commercial Division 118,000 590,000 Internet Division 129,200 760,000 Assume that management has established a 10% minimum acceptable rate of return for invested assets. a. Determine the residual income for each division. Retail Division Commercial Division Internet Division Operating income $94,600 $118,000 $129,200 Minimum acceptable operating income as a percent of invested assets Residual income $ $ $ b. Which division has the most residual income?
Residual Income The operating income and the amount of invested assets in each division of Otte Industries are as follows: Operating Income Invested Assets Retail Division $94,600 $430,000 Commercial Division 118,000 590,000 Internet Division 129,200 760,000 Assume that management has established a 10% minimum acceptable rate of return for invested assets. a. Determine the residual income for each division. Retail Division Commercial Division Internet Division Operating income $94,600 $118,000 $129,200 Minimum acceptable operating income as a percent of invested assets Residual income $ $ $ b. Which division has the most residual income?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Residual Income
The operating income and the amount of invested assets in each division of Otte Industries are as follows:
| Operating Income | Invested Assets | |||
| Retail Division | $94,600 | $430,000 | ||
| Commercial Division | 118,000 | 590,000 | ||
| Internet Division | 129,200 | 760,000 |
Assume that management has established a 10% minimum acceptable rate of
a. Determine the residual income for each division.
| Retail Division | Commercial Division | Internet Division | |
| Operating income | $94,600 | $118,000 | $129,200 |
| Minimum acceptable operating income as a percent of invested assets | |||
| Residual income | $ | $ | $ |
b. Which division has the most residual income?
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