Grand Company has total assets of $700,000, a 12% target rate of return, a return on investment of 14%, and a 10% weighted average cost of capital. What is Grand's residual income?
A) $14,000
B) $84,000.
C) $98,000
D) $28,000

Question

Quizplus · Accepted Answer

Residual income = (Actual return on investment - Target return on investment) * Total assets= (14% - 12%) * $700,000= 2% * $700,000= $14,000

Grand Company Has Total Assets of $700,000, a 12% Target