If a new project generates a positive residual income,the
A)project's return on investment is less than the target rate.
B)project's return on investment is greater than the target rate.
C)project's return on investment is equal to the target rate.
D)relationship between the project's return on investment and the target rate cannot necessarily be determineD.

Question

Quizplus · Accepted Answer

A positive residual income indicates that the project has generated more cash inflows than outflows, resulting in a return on investment that is greater than the target rate. The target rate is the minimum required rate of return that the company wants to achieve, so if the project is earning more than that, it is a good investment.

If a New Project Generates a Positive Residual Income,the