Indigo Corp.has an ROI of 15% and a residual income of $10,000.If operating income equals $30,000,what is the hurdle rate?
A)15%
B)10%
C)33.3%
D)18.3%

Question

Quizplus · Accepted Answer

The hurdle rate can be found using the formula for residual income: Residual Income = Operating Income - (Operating Income * Hurdle Rate). Given that the residual income is $10,000 and the operating income is $30,000, we can set up the equation $10,000 = $30,000 - ($30,000 * Hurdle Rate). Solving for the hurdle rate gives us 10%.