Killian Corp.has a residual income of $30,000 on invested assets of $450,000.If the hurdle rate is 10%,what is the operating income?
A)$30,000
B)$45,000
C)$3,000
D)$75,000

Question

Quizplus · Accepted Answer

Residual income is calculated as Operating Income - (Invested Assets * Hurdle Rate). Given a residual income of $30,000, invested assets of $450,000, and a hurdle rate of 10%, we can set up the equation as follows: Operating Income - ($450,000 * 10%) = $30,000. Solving for Operating Income gives us $30,000 + ($450,000 * 10%) = $30,000 + $45,000 = $75,000.