A company's current net operating income is $16,800 and its average operating assets are $80,000.The company's required rate of return is 18%.A new project being considered would require an investment of $15,000 and would generate annual net operating income of $3,000.What is the residual income of the new project?
A)20.8%
B)20%
C)($150)
D)$300

Question

Quizplus · Accepted Answer

Residual income is calculated as the net operating income from the project minus the required return on the investment. The required return is 18% of $15,000, which is $2,700. The residual income is $3,000 - $2,700 = $300.

A Company's Current Net Operating Income Is $16,800 and Its