Asked by Ja'Lisa Hicks on May 06, 2024
Verified
Wiswell Inc.reported the following results from last year's operations: 
The average operating assets were $8,000,000. At the beginning of this year, the company has a $900,000 investment opportunity that would involve sales of $2,070,000, a contribution margin ratio of 30% of sales, and fixed expenses of $538,200.The company's minimum required rate of return is 10%.If the company pursues the investment opportunity, this year's combined residual income for the entire company will be closest to:
A) $104,800
B) $925,600
C) ($19,800)
D) $994,800
Combined Residual Income
This term might refer to the total residual income from various sources or projects, but without a standard definition, its specific meaning can vary.
Required Rate Of Return
The minimum percentage return that an investor expects to receive from an investment.
Contribution Margin Ratio
Contribution Margin Ratio is a company's contribution margin expressed as a percentage of its total sales, indicating the portion of sales revenue that is not consumed by variable costs.
- Compute and elucidate the concept of residual income utilizing specific financial information.
- Assess the cumulative impact of various investment options on the company's overall performance.
Verified Answer
TF
Tiffany FerreiraMay 08, 2024
Final Answer :
A
Explanation : 
Net operating income = $912,000 + $82,800 = $994,800
Average operating assets = $8,000,000 + $900,000 = $8,900,000
Net operating income = $912,000 + $82,800 = $994,800Average operating assets = $8,000,000 + $900,000 = $8,900,000
Learning Objectives
- Compute and elucidate the concept of residual income utilizing specific financial information.
- Assess the cumulative impact of various investment options on the company's overall performance.