Calculating Residual Income and Return on investment
Vaughn Corporation had net operating income of $380,000 and average operating assets of $2,000,000. The corporation requires a return on investment of 18%. Show all calculations supporting your responses!Required :a.Calculate the company’s return on investment (ROI) and residual income (RI).b.Vaughn Corporation is considering an investment of $70,000 in a project that will generate annual net operating income of $12,950. Would it be in the best interests of the company to make this investment?c.Vaughn Corporation is considering an investment of $70,000 in a project that will generate annual net operating income of $12,950. If the division planning to make the investment currently has a return on investment of 20% and its manager is evaluated based on the division’s ROI, will the division manager be inclined to request funds to make this investment?d.Vaughn Corporation is considering an investment of $70,000 in a project that will generate annual net operating income of $12,950. If the division planning to make the investment currently has a residual income of $50,000 and its manager is evaluated based on the division’s residual income, will the division manager be inclined to request funds to make this investment?Solution is attached as word document also.Solution:a.Calculate the company’s return on investment (ROI) and residual income (RI).ROI=Net operating income/average operating assets=380000/2000000=19%
Corporation’s required income=2000000*18%=$360000
Residual income=Net income-Required income
=380000-360000
=$20000
b.Vaughn Corporation is considering an investment of $70,000 in a project that will generate annual net operating …Solution describes the steps to calculate ROI and residual income.
Calculating Residual Income and Return on investment
Vaughn Corporation had net operating income of $380,000 and average operating assets of $2,000,000. The corporation requires a return on investment of 18%. Show all calculations supporting your responses!Required :a.Calculate the company’s return on investment (ROI) and residual income (RI).b.Vaughn Corporation is considering an investment of $70,000 in a project that will generate annual net operating income of $12,950. Would it be in the best interests of the company to make this investment?c.Vaughn Corporation is considering an investment of $70,000 in a project that will generate annual net operating income of $12,950. If the division planning to make the investment currently has a return on investment of 20% and its manager is evaluated based on the division’s ROI, will the division manager be inclined to request funds to make this investment?d.Vaughn Corporation is considering an investment of $70,000 in a project that will generate annual net operating income of $12,950. If the division planning to make the investment currently has a residual income of $50,000 and its manager is evaluated based on the division’s residual income, will the division manager be inclined to request funds to make this investment?Solution is attached as word document also.Solution:a.Calculate the company’s return on investment (ROI) and residual income (RI).ROI=Net operating income/average operating assets=380000/2000000=19%
Corporation’s required income=2000000*18%=$360000
Residual income=Net income-Required income
=380000-360000
=$20000
b.Vaughn Corporation is considering an investment of $70,000 in a project that will generate annual net operating …Solution describes the steps to calculate ROI and residual income.
Calculating Residual Income and Return on investment
Vaughn Corporation had net operating income of $380,000 and average operating assets of $2,000,000. The corporation requires a return on investment of 18%. Show all calculations supporting your responses!Required :a.Calculate the company’s return on investment (ROI) and residual income (RI).b.Vaughn Corporation is considering an investment of $70,000 in a project that will generate annual net operating income of $12,950. Would it be in the best interests of the company to make this investment?c.Vaughn Corporation is considering an investment of $70,000 in a project that will generate annual net operating income of $12,950. If the division planning to make the investment currently has a return on investment of 20% and its manager is evaluated based on the division’s ROI, will the division manager be inclined to request funds to make this investment?d.Vaughn Corporation is considering an investment of $70,000 in a project that will generate annual net operating income of $12,950. If the division planning to make the investment currently has a residual income of $50,000 and its manager is evaluated based on the division’s residual income, will the division manager be inclined to request funds to make this investment?Solution is attached as word document also.Solution:a.Calculate the company’s return on investment (ROI) and residual income (RI).ROI=Net operating income/average operating assets=380000/2000000=19%
Corporation’s required income=2000000*18%=$360000
Residual income=Net income-Required income
=380000-360000
=$20000
b.Vaughn Corporation is considering an investment of $70,000 in a project that will generate annual net operating …Solution describes the steps to calculate ROI and residual income.
Calculating Residual Income and Return on investment
Vaughn Corporation had net operating income of $380,000 and average operating assets of $2,000,000. The corporation requires a return on investment of 18%. Show all calculations supporting your responses!Required :a.Calculate the company’s return on investment (ROI) and residual income (RI).b.Vaughn Corporation is considering an investment of $70,000 in a project that will generate annual net operating income of $12,950. Would it be in the best interests of the company to make this investment?c.Vaughn Corporation is considering an investment of $70,000 in a project that will generate annual net operating income of $12,950. If the division planning to make the investment currently has a return on investment of 20% and its manager is evaluated based on the division’s ROI, will the division manager be inclined to request funds to make this investment?d.Vaughn Corporation is considering an investment of $70,000 in a project that will generate annual net operating income of $12,950. If the division planning to make the investment currently has a residual income of $50,000 and its manager is evaluated based on the division’s residual income, will the division manager be inclined to request funds to make this investment?Solution is attached as word document also.Solution:a.Calculate the company’s return on investment (ROI) and residual income (RI).ROI=Net operating income/average operating assets=380000/2000000=19%
Corporation’s required income=2000000*18%=$360000
Residual income=Net income-Required income
=380000-360000
=$20000
b.Vaughn Corporation is considering an investment of $70,000 in a project that will generate annual net operating …Solution describes the steps to calculate ROI and residual income.
