When using residual income as a project-screening tool,management should accept a project if the residual income is:
A) positive.
B) negative.
C) equal to the ROI.
D) greater than net income.

Question

Quizplus · Accepted Answer

When using residual income as a project-screening tool, a positive residual income indicates that the project's return is greater than the minimum required return. Therefore, management should accept the project. Negative residual income suggests that the project's return is lower than the cost of capital, indicating that management should reject the project. Hence, the best choice for this question is A - positive.

When Using Residual Income as a Project-Screening Tool,management Should Accept