If profit after tax is $600 000,taxation is $280 000,the required rate of return is 15%,and the investment is $2 000 000,the residual income calculation is:

Question

Quizplus · Accepted Answer

Residual income is calculated as follows:

Residual Income = Profit after tax - (Required Rate of Return * Investment)

Substituting the values given in the question, we get:

Residual Income = $600,000 - (15% * $2,000,000) - $280,000
Residual Income = $600,000 - $300,000 - $280,000
Residual Income = $20,000

Therefore, the correct answer is D) $580,000.

If Profit After Tax Is $600 000,taxation Is $280 000,the