If net operating income is $70,000, average operating assets are $250,000, and the minimum required rate of return is 16%, what is the residual income?

A) $11,200
B) $40,000
C) $110,000
D) $30,000

Question

If net operating income is $70,000, average operating assets are $250,000, and the minimum required rate of return is 16%, what is the residual income?A)  $11,200B)  $40,000C)  $110,000D)  $30,000

Paige Caldwell · Accepted Answer

Final Answer : D, Explanation :  Residual income is calculated as net operating income minus (minimum required rate of return multiplied by average operating assets):Residual income = $70,000 - (0.16 x $250,000) = $30,000Therefore, the correct answer is D) $30,000.

If net operating income is $70,000, average operating assets are $250,000, and the minimum required rate of return is 16%, what is the residual income?

A) $11,200
B) $40,000
C) $110,000
D) $30,000

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